Question 2
ICAN
•
2025
•
PERFORMANCE MANAGEMENT
•
mixed
Case Stimulus
Adebat Cleaning Services is a company that operates a car wash service in Ikeja, Lagos State. The economic condition in Nigeria in recent times has affected all households and businesses. Due to deregulation, petroleum products prices have gone up astronomically and food inflation has also reached an all-time high of over 200%. Costs of vehicles have gone up beyond the reach of an average citizen, having increased by over 300% due to the depreciation on the naira exchange rate to other international currencies. The economic situation has further reduced the disposable income of citizens by over 50%. As a result of this harsh economic environment, car owners find it difficult to replace their cars and now result to constant maintenance, including regular car wash.
Adebat Cleaning Services operates two types of car wash, Complete-wash and Mini-wash. The Complete wash entails cleaning of both the inside and outside of the cars, while Mini wash is the washing of the outside of the cars only. Adebat charges ₦1,000 and ₦500 for the Complete and Mini wash respectively.
The company’s budget and actual figures for 2024 were as follows:
Budget Actual
Number of cars:
Complete – wash 6,000 6,800
Mini – wash 4,000 7,000
₦ ₦
Revenue 8,000,000 10,640,000
Variable costs:
Staff wages (3,840,000) (4,018,800)
Cleaning materials (200,000) (400,000)
Energy costs (240,000) (340,800)
(4,280,000) (4,759,600)
Contribution 3,720,000 5,880,400
Fixed costs:
Rent, rates and depreciation (1,200,000) (1,200,000)
Operating profit 2,520,000 4,680,400
The budgeted contribution to sales ratios for the two types of car wash are 45% for complete-wash and 56% for mini-wash.
Additional Information
{
"label": "Supporting information 1",
"content": "| | Budget | Actual |\n|----------------------|--------|----------|\n| Number of cars: | | |\n| Complete – wash | 6,000 | 6,800 |\n| Mini – wash | 4,000 | 7,000 |\n| | ₦ | ₦ |\n| Revenue | 8,000,000 | 10,640,000 |\n| Variable costs: | | |\n| Staff wages | (3,840,000) | (4,018,800) |\n| Cleaning materials | (200,000) | (400,000) |\n| Energy costs | (240,000) | (340,800) |\n| | (4,280,000) | (4,759,600) |\n| Contribution | 3,720,000 | 5,880,400 |\n| Fixed costs: | | |\n| Rent, rates and depreciation | (1,200,000) | (1,200,000) |\n| Operating profit | 2,520,000 | 4,680,400 |"
}
Requirements
(
a
)
Explain briefly the sales mix contribution variance and the sales quantity contribution variance.
(
c
)
In the light of the situation in Nigeria and using the results of your calculations in (b) above, discuss the sales performance of Adebat Cleaning Services in 2024.
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About This Question
This is
Ican
2025
Performance Management
Question 2.
It is one of the
mixed
questions from the
2025
Ican
Performance Management
examination.