V LINER EXPRESS, INC.

Critical Issues Investigated

1. DRIVERS POTENTIAL STRIKE 2. ACCIDENT IN THE ROAD 3. PROPOSAL TO OUTSOURCE FOOD SERVICE 4. SPECIAL OFFER: CHARTERED BUS 5. CONFIDENTIALITY ISSUE IN CONTRACT BIDDING (Ethical Issue)

MoSCoW Method
Must Have Drivers Potential Strike Should Have Accident in the Road Could Have Proposal to Outsource Food Service Wont Have Special offer: Chartered Bus

DRIVERS POTENTIAL STRIKE

Option 1: CONDUCT A COLLECTIVE BARGAINING

Advantages
Lead to high-performance workplace Provides legally based bilateral relationship Managements rights are clearly spelled out Employers and employees rights are protected Provide budgetary predictability on salary and other compensation issues Management and employees may become strong allies in protecting the companys operations Fairness and consistency in employment policies and personnel decisions

Disadvantages
Managements authority and freedom are much more restricted Creates significant potential for polarization Disproportionate effect of relatively few active employees on the many in the bargaining unit Increases bureaucratization and requires longer time needed for decision making, Protects the status quo Higher management costs Eliminates ability of management to make unilateral changes in wages, hours, and other terms and conditions of employment; and Restricts managements ability to deal directly with individual employees.

Option 2: OFFERING AN INCENTIVE PAY BASED ON PERFORMANCE IN ADDITION TO FIXED SALARY

Advantages Less expensive for the company to implement Forms a framework for rewarding employees Aligns the objectives of the organization and those of the bus drivers and conductors, Higher motivation levels among bus drivers and conductors Provides company with a way to extend additional rewards to its best employees, Gives employees a major incentive Depending on the arrangement, the bestowal of increased security to employees may allow the company to take a greater percentage of profits.

Disadvantages More expensive for the company to implement that if it is only based on the original fix rate set by them,

Option 3: GRANTING EMPLOYEES DEMAND FOR HIGHER COMPENSATION

Advantages Employees will be happy and satisfied which in turn can lead to their sympathy and loyalty to the company The company will have a good image perception from their employees and the general public It will create a good and healthy relationship between the management and their employees Employees job security will be enhanced

Disadvantages Too costly for the company to implement Eliminates the employees' incentive to perform Foster an environment of complacency

Option 4: HIRE NEW DRIVERS WHO WILL AGREE WITH MANAGEMENTS COMPENSATION PLAN, POLICIES AND REGULATION

Advantages Significant cost savings could be achieved since the compensation to be paid is the one originally planned by the company, Improved quality can be achieved by hiring drivers with more experience and enhanced skills; and Allows the company to have smooth operations since they dont have to deal or fix any matters. They dont need to allot much time in decision making unlike if they proceed to collective bargaining agreement.

Disadvantages Expose an organization to potential risks and legal exposure, Negative perceptions and the sympathy of lost jobs might be created, Newly hired employee may not have the same understanding, sympathy and passion for the organization, Company might have a hard time looking for new competent employees, It will cost much to the company because hiring new employees require new documentations and legal requirements; and It can have a negative impact on remaining employees.

Option 1: CONDUCT A COLLECTIVE BARGAINING

Option 2: OFFERING AN INCENTIVE PAY BASED ON PERFORMANCE IN ADDITION TO FIXED SALARY

Option 3: GRANTING EMPLOYEES DEMAND FOR HIGHER COMPENSATION

Option 4: HIRE NEW DRIVERS WHO WILL AGREE WITH MANAGEMENTS COMPENSATION PLAN, POLICIES AND REGULATION

ACCIDENT IN THE ROAD

Option 1: RETAIN OLD BUSES

Advantages

Disadvantages

Lest costly Higher repair and Avoidance of cash outflow maintenance costs. Lesser depreciation Prone to mechanical expense malfunction Poor traveling condition Lessen the good image of the company

Option 2: REPLACE OLD BUSES WITH NEW BUSES

Advantages

Disadvantages

Improved operation Initial outlay cost Better passenger Unavailability of funds. satisfaction May incur registration, set More attractive from up costs, and other similar potential passenger point of costs view Long-run benefits (e.g. future savings)

Supporting computation:
Savings (P2.15M x 3yrs.) P 6,450,000

Salvage value of old bus

Less: Purchase price of new bus Net cash inflows (outflows) per bus

500,000
7,000,000 P(50,000)

The lost that will be incurred in the acquisition of 10 buses is P500,000,

Option 1: RETAIN OLD BUSES

Option 2: REPLACE OLD BUSES WITH NEW BUSES

PROPOSAL TO OUTSOURCE FOOD SERVICE

Reduce in the complains from the customers

Factors Proposal Intends to Achieve

Savings in Management Time and Resources

Endorsement of Anettes Work

Reliability of NIFS

Factors affecting the Proposal

Cost of Implementing the Proposal

Cost of implementing the proposal:

Cost to Make Food cost Labor (P85,000; P85,000 x 10%) Variable overhead (P45,000; P45,000 x 10%) Cafeteria food sales (P90,000; P90,000 x 115%) NIFS charges (250 seats x 70% x 365 days x P14) Net cost Benefit P 890.000 85,000 45,000 (90,000) P 930,000 Cost to Outsource P8,500 4,500 (103,500) 894,250 P 803,750 P126,250

Take note that the allocated overhead is not a relevant decision factor.

SPECIAL OFFER: CHARTERED BUS

FACTORS AFFECTING THE SPECIAL OFFER

Timing of the Special Offer Effect on Regular Sales Possible Contracts in the Future Revenue (Loss) in the Special Offer

When Consumer Travels

Timing of the Special Offer Effect on Regular Sales Possible Contracts in the Future Revenue (Loss) in the Special Offer

During Holidays

Special Occation

Regular Days

12%

25%

63%

Brand Preference - North Bound

Timing of the Special Offer Effect on Regular Sales Possible Contracts in the Future Revenue (Loss) in the Special Offer

V Liner Genesis

Other Five Star

V Liner and other Genesis and other

4% 11%

4%

41% 11%

29%

 Timing of the Special Offer Effect on Regular Sales Possible Contracts in the Future Revenue (Loss) in the Special Offer

Special Price of the Offer

P250,000

Less: Relevant Cost of the Special offer:

Timing of the Special Offer Effect on Regular Sales Possible Contracts in the Future Revenue (Loss) in the Special Offer

Variable operating cost (P16100 x 3days x 3 buses) Savings on reservations and ticketing Avoidable Fixed cost (P6,900 x 30%) x 3 days x 3 buses Contribution Margin from special offer Less: CM Loss from the forgone regular sales (peak season) Net disadvantage in accepting the offer CM forgone: Regular sales (P445 x 36 seats) x 2 (back and forth) x 3 days x 3 buses Variable operating cost Contribution Margin

P144,900

(27,000)

117,900

18,630

P113,470

143,460 P(29,990)

P288,360 (144,900) P143,460

CONFIDENTIALITY ISSUE IN CONTRACT BIDDING (ETHICAL ISSUE)

 Considerations:

The key fundamental principles in the Code of Ethics as given by the International Federation of Accountants (IFAC)

Can Lourdes Perez safeguard against the significant self-interest threat which arises from V Liners performance-related bonus scheme?

Objectivity:

Confidentiality:

If she would accept the assignment, can she ensure that she does not use confidential information relating to her previous employer to her advantage or to the advantage of her current employer?

What can Lourdes do to safeguard her reputation and the reputation of her employer and her profession?

Professional Behavior:

Possible Course of Action