Question 1 (25 marks) TicketGuru, Inc., is a primary ticket outlet and distribut

Question

Question 1 (25 marks) TicketGuru, Inc., is a primary ticket outlet and distribution company in North America. TicketGuru earns a majority of its revenue from primary ticketing and resale ticket services on behalf of its elients. TicketGuru's major costs are royalties paid to clients, te costs associated with its call centre, and commissions paid to music chains and department stores. Its business has improved steadily over the past 10 years. As usual, Rodrcik Kay, the managing partner of T most recent year. cketGuru, Inc., received a report summarizing the performance for the TicketGuru, Inc. Performance Report For the year ended December 31, 20127 Budget Actual Variance Number of tickets sold Variable Expenses Royalties 135 180 45 $84,10508,980 24875) ($24,875) ($19,040) $45,870 (S15,870) Telecommunication $120,962 $30,000 $235,067 $140,002 Commissions Total Fixed Expenses Server maintenance Total Total Expenses 204 852 ($59,785) 510,000 $510,000 $804,852 $500,040 ($9,960) $500,040 $755,107 $804852 75) ($69,745) Required: a) Explain the major weaknesses of the performance report (5 marks) b) Explain clearly why all variances are unfavourable (5 marks)

Explanation / Answer

Answer to Part a)

The Performance Report prepared by TicketGuru Inc has some deficiencies and is not useful for comparison. The Major weakness in the Performance Report is the Units compared, as the Budgeted Units and Actual units sold are different. To know how the Corporation is performing, the same number of units needs to be compared.

Answer to Part b)

All the Variances are Unfavourable, because all the Actual Expenses are more than the Budgeted Expenses. The Actual Expenses should be less than the Budgeted Expenses to make the Variances favourable.

Whereas the Actual Revenue should be more than the Budgeted Revenue to make the Variance favourable.

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