Question :

Three years ago, Thomas Wilkins finished his degree in accounting. The economy was in a depressed state at the time, and Thomas managed to acquire an offer of only $20,000 per year as a bookkeeper. In addition to its comparatively low pay, this job had limited advancement potential.

Since Thomas was an ambitious and enterprising young man, he declined this offer and started a business of his own. He was convinced that because of changing lifestyles, a drive-through coffee establishment would be beneficial. He was able to obtain backing from his parents to open such an establishment close to the industrial park area in town. Thomas named his business Cafe Express and decided to sell only two type types of coffee: decaffeinated and cappuccino.

As Thomas had expected, Cafe Express was very well received. Within three years, Thomas had added another outlet north of town. He left the day-to-day management of each site to a manager and focused his own attention on overseeing the entire enterprise. He also hired an assistant to do the record keeping and to perform selected other shores.

Required:

1. What factors are important to the success of Cafe Express? Which of these are controllable by Thomas? Does it matter?

2. What main tasks does Thomas have to undertake in managing Cafe Express? Describe which ones lead to an ability to control his business operations versus which ones are aimed to assist in making decisions.

3. What are the costs of operating Cafe Express? Suppose whether each of these costs as direct or indirect, variable or fixed, controllable or uncontrollable, period cost or product cost, or opportunity cost and what role that plays in decisions Thomas must make.

4. Thomas could like to monitor the performance of each site manager. What measure, or measures, should he use? If you suggest more than one measure, which of these should Thomas select if he could use only one? In other words, which could be the single best measure if he had to narrow it down, or can he narrow it down without some trade-off to his intended purpose?