Answered step-by-stepAccording to the below case, does The capital portrait studio(CPS)...
According to the below case, does The capital portrait studio(CPS) need to organize cost centres and revenue centres? Is that something CPS should consider?
Today is January 11, 2018. You, CPA, just started working for The Capital Portrait Studio (CPS), a well-known photography studio in the nation's capital. The company was founded 10 years ago by Suzanne Quah and has seen tremendous growth during that time. The main studio is located in downtown Ottawa and there is another location used for outdoor sessions in the Gatineau Hills area, about 30 minutes from the city. The rural setting is becoming popular with customers who like to have their photos taken in a natural setting.
- There were 480 studio sessions and 24 weddings at the Ottawa studio last year. Seventeen customers complained about being assigned to other photographers (Anne Hawley and Jon Lafferty) when they expected to be dealing with Suzanne. Their regular studio fees were discounted by 50%.
- Cindy Strauss (office manager) made bookings for 200 outdoor sessions and 12 weddings at the Gatineau location. All of the wedding parties arrived but only 175 of the other customers showed up. When there were scheduling conflicts with people arriving late for regular studio sessions, both groups of customers received a 50% discount on their studio fee, which happened 20 times last year.
- Suzanne prepared the budget herself, using the prior year's actual results as her guide. She increased revenue by 10% based on what she wanted the company to achieve. The details of the budget were not shared with the rest of the staff.
NOTES FROM DISCUSSIONS WITH STAFF
- the company has two full-time photographers on staff (in addition to Suzanne) and hires additional contractors if there are conflicting schedules. Anne Hawley and Jon Lafferty have been with the company for five years. For the first few years after CPS was incorporated, Suzanne did all the photography herself. She hired Anne and Jon when she found she could not keep up with the demand. The full-time photographers are salaried employees.
- Peter Grouse manages the digital imaging and technical side of the business. In addition to producing all of the images in the production facility, he manages a full-time staff of three computer technicians and is responsible for ensuring the company has the latest in electronic and digital equipment to maintain its competitive edge. "We developed new processes this year to keep down costs," he told you. "I just don't understand why Suzanne thinks this was a bad year. We managed to hold related costs to 57% of digital images and print revenue and that was a lot better than we had done before."
- Cindy Strauss is responsible for the scheduling for both locations. She tries to accommodate customer requests but that task has become more difficult with two locations."We did not really account for bad weather or traffic. People show up late or get lost and then we get two groups arriving at the same time. We try to make time for both groups but it has been hard."
If the weather is bad, the Gatineau sessions have to be rescheduled because all of the work is currently done outdoors. "We did not factor in the extra cost of dealing with a site that is dependent on the weather," Cindy explained. "If our staff drives out to the Gatineau location and the customers do not show up, we do not recoup those extra costs."
Since the company's advertising focuses on Suzanne as the face of the business, many customers expect her to be the sole photographer for their shoots. Cindy explained, "That has been a problem because some people do not want to deal with anyone else. They ask for Suzanne by name and they get really mad if I suggest they consider Anne or Jon instead."
Turnover has not been a problem for the company but Cindy thinks that may change if Suzanne does not consider salary increases for the staff this year.
Answer & Explanation
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