Private Fitness LLC is a little wellness nine located in Rancho Palos Verdes. California. an upscale community located in the Los Angeles country. The nine offers personal fittingness preparation and fittingness categories of assorted types including aerobic exercises. whirling. organic structure sculpting. air packaging. kickboxing. hip hop. measure and pump. dynamic stretch. Pontius pilates. and yoga.
The undermentioned services and fees per hr are collected by Private Fitness LLC: With personal trainers/instructors
Private Fitness LLC is owned by Rosemary Worth. a former finalist in the Ms. Fitness USA competition. She had been working as an aerobic exercise teacher and fittingness theoretical account before get downing Private Fitness. To open the nine. Rosemary had to utilize about all her personal nest eggs. plus she had to take out a bank loan. She spent $ 150K to restitute the installation of her nine and get the necessary fittingness equipments.
Rosemary hired Kate Hoffman as a concern director. Kate’s primary undertakings included selling. installation upkeep. programming of assignments. and record maintaining. Kate was paid a salary plus a committee based on gross grosss. Kate was turn outing to be an effectual selling director because the figure of clients was turning. and Rosemary hoped that by the terminal of the twelvemonth the concern would be gaining a net income.
However. Rosemary became leery of Kate and bit by bit realized that Kate wasstealing from the nine. One clip. a $ 60 was replaced with $ 20 in the hard currency drawer. Rosemary asked Kate but the latter denied that there had been $ 60 dollars in the drawer.
Rosemary became really alarmed when. during a insouciant conversation. one of the teachers mentioned about the “good news” about Kate delivery in new private fittingness client but no new gross was recorded. Kate eventually admitted that the client has been composing her personal cheques straight. Rosemary realized she had two major jobs: the larceny of hard currency and the live gross. These are internal control issues that Rosemary need to turn to. She did non wantto measure in and presume the managerial function herself because she had important household duties to which she wanted to be able to go on to go to to.
II. STATEMENT OF THE PROBLEM
What should Rosemary make with Private Fitness LLC’s deficiency of internal control system?
a ) To efficaciously minimise loss from larceny and related internal control jobs. B ) To increase company net income.
degree Celsius ) To properly segregate employees’ responsibilities and duties to do them more effectual and efficient. vitamin D ) To accomplish a healthy balance between household and concern.
IV. AREAS OF CONSIDERATION
1. There is no proper recording of grosss.
Gross is dependent on the figure of clients go toing categories and private exercises. There is nevertheless no recording system to decently supervise the clients and figure of exercise attendants.
2. There is no proper recording of operating outgos.
Basic operational disbursals like electric and H2O measures. rent. bank involvement. visible radiation. telephone and communications need to be paid on clip. These disbursals need to be recorded and tracked accurately in order to come up with dependable fiscal study and facilitate monitoring of tendencies.
3. No programming system for teachers and employees.
What teachers. and other employees. should be on responsibility at what hours are non defined. Same with agenda of categories. there is no assigned clip and locale for intents of the different categories. The capacity use is non decently identified to maximise infinite to gross mix. There is besides no cleansing and care agenda to be followed.
4. Payroll system is inexistent
Most of the compensation is commission-based. paid as a per centum of revenueassociated with the instructor’s activities. How do employees committees are paidcorrectly when gross recording is inexistent? The same with the director KateHoffman. who is besides paid a wage.
5. Fixed plus system
The installation and fittingness equipments’ costs should be allocated over clip periods andreflected as disbursal in the income statement.
6. Rosemary’s household related concerns
Rosemary is serious about her household responsibilities that she is hesitating to take full control of the company’s operations.
7. Fundsare limited
Rosemary’s runing financess appears limited given the fact that she had spent her resources in the care of the nine and acquisition of fittingness equipments. Besides the fact that she is unable to properly track the grosss and disbursals means she is unable tokeep a good record of her existent fundss.
V. ALTERNATIVE COURSES OF ACTION
1. Relegate Kate Hoffman to permanent fittingness teacher and engage a competentmanager to supervise the day-to-day operations of Private Fitness LLC. Kate Hoffman wasn’t really helpful and trusty being a director of the nine. She demonstrated this by pocketing money off the hard currency drawer and non remitting revenuesfrom her personal preparation callss with clients. The new director will be to a great extent involved in supervising the activities of employees andinstructors including scene and specifying specific responsibilities and duties of eachemployee. He/she will besides be responsible with the overall care of the installations. doing certain they are good maintained. He/she shall besides move as a selling employee that will assist bring forth more grosss for Private Fitness LLC. She will be paid on fixed wages plus 20 % committee based onmonthly grosss.
a ) Business operations will be decently and efficaciously handled
B ) Better programming of fittingness teachers and employees
degree Celsius ) Fitness installations are better maintained
vitamin D ) Growth in client base can be moderately expected
a ) There is added cost of engaging a new director
B ) Kate Hoffman may take the action against Rosemary. striving their friendly relationship degree Celsius ) Hiring new director may non needfully ensue in immediate turnaround of Private Fitness LLC 2. Hire the services of an comptroller to maintain path on the concern fundss. Accountant will turn to some nucleus internal control issues confronting Private Fitness LLC: from gross system to payroll and expenditure monitoring system.
a ) Tracking grosss and disbursals will assist Rosemary faithfully assess the incomeshe’s doing out of the fittingness concern. B ) The comptroller will move as an early warning system for incoming measures and bankamortizations to be paid by Rosemary. degree Celsius ) Monitoring the gross and disbursals tendencies will assist topographic point and avert potentialfrauds. vitamin D ) More dependable committee inducements to teachers and employees. vitamin E ) Accountant will help
Rosemary with revenue enhancement related affairs.
a ) There is added cost of engaging a comptroller
B ) Hiring a comptroller may non needfully intend the concern will do moremoney.
3. Private Fitness LLC should put on CCTV security system. CCTV systems are widely used security substructure to extenuate varied hazards from theftto offenses to other junior-grade issues within and outside the constitution.
a ) Improves the security of the installations and equipments
B ) Reduces the potency for employee fraud and larcenies
degree Celsius ) Enhances Private Fitness LLC’s concern image by doing the country safer andsecured Disadvantages:
a ) High cost for CCTV security systems
B ) There may be issues on effectivity as some CCTVs have limited scope.
4. Rosemary to personally oversee Private Fitness LLC’s day-to-day operation and keepaccounting records.
a ) Reduces the potency for employee fraud and larcenies
B ) Her active managerial function will probably portray a positive image to clients about her earnestness and committedness to the concern Disadvantages:
a ) She will significantly cut down her clip spent on household
B ) Pressures both from work and household could take a toll on her wellness
5. Close Private Fitness LLC. sell its installations and concentrate on household responsibilities.
a ) Rosemary can outdo manage his household responsibilities when she is free from Private FitnessLLC’s day-to-day demands. B ) Pressure to do the concern profitable is off
degree Celsius ) She spend her clip and dressed ore on other activities