Reference no: EM13595569

Great News! Penny won the contract to sell pizzas at the state basketball tournament last month. Let's see: 6 games times 5 divisions = 30 games. We're going to use this case to demonstrate the difficulties inherent in responsibility accounting/variance analysis. The boys tournament is held the week before the girls tournament.

Jennifer, our VP of marketing, has forecasted sales volume of 1000 pizzas per game. Stephanie has been assigned to work the tournaments. 15 games one week for the boys and 15 games the next week for the girls. Her $400 weekly salary will be assigned to this special project for the two week period, and she is responsible for hiring part-time workers to staff the pizza stands. She is paying $8.50 per hour, including payroll taxes. She estimates that she will need 4 hours of help per game. We have to pay the VPA $3 per pizza sold. A spreadsheet with relevant Data may be found in the Weekly Outline.

Nice, we expected to make over $20,000 for two weeks work, if all went well. All didn't go well. During the boys' tournament, only 7000 pizzas were sold. 8,000 unsold pizzas were donated to the Foodbank, and we lost over $20,000. Stephanie was smart enough to cut half her labor, and not make as many pizzas for the girls tournament. Unfortunately, she was unable to meet the demand for pizzas during 8 of the games. This was due to not having enough staff, and not having enough pizzas made. During the other 7 games, she ended up with 2000 unsold pizzas and had to donate them. She did manage to clear a couple thousand that week, but we lost over $18,000 on the venture.

What should Penny do? Who is responsible for this disaster? Does Stephanie need a spanking? Should Jennifer get fired? What would you do? Don't forget to use some variance analysis.