DMV Case Study

DMV CASE STUDY 10

Institution affiliation:

DMV case study

Question1: Operating budgets

Annual Revenues and Expenditures

Revenues

Expenditures

DOT

96000000

New system

3000000

Old Licensing

923456

25

23086400

Stricter test

7200000

New Licensing

843023

30

25290690

Inquiries

1.3

1000000

1300000

Vision Tests

342587

Administrative costs

6500000

Written driving tests

847129

Personal costs

2

5454007

10908014

Road tests

429222

Materials and supply

0.3

5454007

1636202.1

Vehicle registration

962135

53

50993155

Overhead costs

8000000

Vehicle inspections

1106455

35

5808888.75

Inspection contract

17

1106455

18809735

Vision test contract

2

342587

685174

Road test contract

15

429222

6438330

Written test contract

5

847129

4235645

License plate contract

25

962135

721601.25

Old license contract

10

923456

9234560

New license contract

37

843023

31191851

Total

201179134

Operating total

99661112.35

OPERATING BUDGET

CURRENT REVENUE

Old Licensing

23086400

&nbsp

New Licensing

25290690

&nbsp

Vision Tests

&nbsp

Written driving tests

&nbsp

Road tests

&nbsp

Vehicle registration

50993155

&nbsp

Vehicle inspections

5808889

105179134

LESS OPERATING COSTS

Inquiries

1300000

Administrative costs

6500000

Personal costs

10908014

Materials and supply

1636202.1

Overhead costs

8000000

Inspection contract

18809735

Vision test contract

685174

Road test contract

6438330

Written test contract

4235645

License plate contract

721601.25

Old license contract

9234560

New license contract

31191851

-99661112

Surplus

5518021.65

It is evident that the entity will surpass budget targets in relationto constraints given of $96 million

Months

Licenses revenue

Vehicle Reg revenue

Vehicle Inspection revenue

Operating costs

Profits

Jan

230864

25

5771600

80177.9167

53

4249429.58

92204.5833

35

484074.0625

8305092.696

2200010.95

Feb

230864

25

5771600

80177.9167

53

4249429.58

92204.5833

35

484074.0625

8305092.696

2200010.95

Mar

230864

25

5771600

80177.9167

53

4249429.58

92204.5833

35

484074.0625

8305092.696

2200010.95

April

230864

25

5771600

80177.9167

53

4249429.58

92204.5833

35

484074.0625

8305092.696

2200010.95

May

105377.875

30

3161336.25

80177.9167

53

4249429.58

92204.5833

35

484074.0625

8305092.696

-410252.8

June

105377.875

30

3161336.25

80177.9167

53

4249429.58

92204.5833

35

484074.0625

8305092.696

-410252.8

July

105377.875

30

3161336.25

80177.9167

53

4249429.58

92204.5833

35

484074.0625

8305092.696

-410252.8

Aug

105377.875

30

3161336.25

80177.9167

53

4249429.58

92204.5833

35

484074.0625

8305092.696

-410252.8

Sept

105377.875

30

3161336.25

80177.9167

53

4249429.58

92204.5833

35

484074.0625

8305092.696

-410252.8

Oct

105377.875

30

3161336.25

80177.9167

53

4249429.58

92204.5833

35

484074.0625

8305092.696

-410252.8

Nov

105377.875

30

3161336.25

80177.9167

53

4249429.58

92204.5833

35

484074.0625

8305092.696

-410252.8

Dec

105377.875

30

3161336.25

80177.9167

53

4249429.58

92204.5833

35

484074.0625

8305092.696

-410252.8

Question 2

In accordance to the monthly budgets’ figures, it is clear that inthe first four months there is a surplus in estimated revenues minusexpenditures. Essentially, this is brought about by new licensesissued at the start of the year as people rush to get subsidizedrates for old system licenses as opposed to released new ones. Newsystem has its set back as licenses offered are at a higher pricethan expectations of drivers. Due to one reason or another, somedrivers may not manage to beat the April deadline thus will face highprices subsequently.

Question 3

OPERATING BUDGET

CURRENT REVENUE

Old Licensing

23086400

&nbsp

New Licensing

25290690

&nbsp

Vision Tests

&nbsp

Written driving tests

&nbsp

Road tests

&nbsp

Vehicle registration

50993155

&nbsp

Vehicle inspections

11617777.5

110988023

LESS OPERATING COSTS

Inquiries

1300000

Administrative costs

6500000

Personal costs

10908014

Materials and supply

1636202.1

Overhead costs

8000000

Inspection contract

18809735

Vision test contract

685174

Road test contract

6438330

Written test contract

4235645

License plate contract

721601.25

Old license contract

9234560

New license contract

31191851

-99661112

Surplus

11326910.2

As shown above, where failing inspections increased from 15 percentto 30 percent there will be an increase in total revenue hence, moresurplus. Consequently, this gives DMV a substantial reason to hikestandards in place for vehicle inspection to increase revenue to keepup with recent technology as seen in its acquisitions. In short,technique used for revenue increment is valuable since safety onroads will be heightened because of highly analyzed vehicles.

Question 3

OPERATING BUDGET

CURRENT REVENUE

Old Licensing

27703680

&nbsp

New Licensing

25290690

&nbsp

Vision Tests

&nbsp

Written driving tests

&nbsp

Road tests

&nbsp

Vehicle registration

50993155

&nbsp

Vehicle inspections

5808889

109796414

LESS OPERATING COSTS

Inquiries

1300000

Administrative costs

6500000

Personal costs

10908014

Materials and supply

1636202.1

Overhead costs

8000000

Inspection contract

18809735

Vision test contract

685174

Road test contract

6438330

Written test contract

4235645

License plate contract

721601.25

Old license contract

34167872

New license contract

31191851

-124594424

Surplus

-14798010

In DMV, operating budget in a situation where new digitized licensingsystem was implemented at beginning throughout the year shows adeficit budget. This is mainly caused by the high rate of contractamount to make new licenses, which increased from $10 to$37. Revenuefrom licensing increased from $23086400 to $27703680 but this wascancelled out by increase of contract expenditure from $9234960 to$34167872, which shows this served as an advantage to the company asmany drivers opted for the cheaper old licenses, which wereaccommodated in annual budget figures.

What would happen if new licenses were not implemented at all duringthe year?

OPERATING BUDGET

CURRENT REVENUE

Old Licensing

23086400

&nbsp

New Licensing

21075575

&nbsp

Vision Tests

&nbsp

Written driving tests

&nbsp

Road tests

&nbsp

Vehicle registration

50993155

&nbsp

Vehicle inspections

5808889

100964019

LESS OPERATING COSTS

Inquiries

1300000

Administrative costs

6500000

Personal costs

10908014

Materials and supply

1636202.1

Overhead costs

8000000

Inspection contract

18809735

Vision test contract

685174

Road test contract

6438330

Written test contract

4235645

License plate contract

721601.25

Old license contract

9234560

New license contract

8430230

-76899491

Surplus

24064527.7

Budget figures resulting from failure to implement new licenses showhigh surplus from $5518021 to $24064527, which is an enormousdifference. In spite of the low rate of licensing involved with oldlicenses, there is a huge distinction realized from employment ofcontractors whose payments reduce from $37 to $10 thus increasingrevenues definitely. In reality, there is a great amount of revenuesgoing with issuing new licenses due to high contract amounts paid.Assumption made that no change in licensing is unrealistic since aswe see in our example there is a high subscription to licenses in oldsystems unlike the new system, which is almost half. Moreover, peopledo resist change and since implementation of new technology is notfollowed high subscription seem to go hand in hand (Garrison, Noreen,Brewer, &amp McGowan, 2010). In total, implementation of newlicenses is a failure, as high costs accrued are not covered incharge system in place.

What other changes would you suggest that might help the DMV’ssituation?

One of the suggestions for DMV is to increase amount of money paid tosubscription to new licenses such that there is a profit marginincurred. However, rejection of the system can be the aftermathdisadvantage despite the company realizing substantial profits andprogress without depending on government aid. In another context,either DMV can decrease amount of inquiries made in computerizedsystem or, payments should be made by users to inquire aboutanything. Although this can be a viable change to the organization,it may fail since expenses to be paid have no direct responsibilityto the inquiries (Garrison et al, 2010). Advantage of this techniqueis high accountability to all expenditures in the organization. Furthermore, not only can DMV decrease personal costs andadministrative costs involved but also overhead costs incurred. Costsrelating to employee welfare may be detrimental to company’sprogress thus may be a failure if followed. Advantage of this methodis high follow up of all company costs and derives overpayments toservices and supplies conclusively.

Overall, best system technique to improve company profits thoughbeing at some cost at the start would be matching license fees withcontract amount paid for each license to include a profit margin. Asold system licenses have a margin of $15, the same should apply fornew licenses.

OPERATING BUDGET

CURRENT REVENUE

Old Licensing

23086400

&nbsp

New Licensing

43837196

&nbsp

Vision Tests

&nbsp

Written driving tests

&nbsp

Road tests

&nbsp

Vehicle registration

50993155

&nbsp

Vehicle inspections

5808889

123725640

LESS OPERATING COSTS

Inquiries

1300000

Administrative costs

6500000

Personal costs

10908014

Materials and supply

1636202.1

Overhead costs

8000000

Inspection contract

18809735

Vision test contract

685174

Road test contract

6438330

Written test contract

4235645

License plate contract

721601.25

Old license contract

9234560

New license contract

31191851

-99661112

Surplus

24064527.7

License subscription is core business of DMV therefore mostappropriate change to improve company’s welfare would be to makechanges in its core reason of existence. In analyzing all otherfactors there may be unwelcomed resistance from stakeholders, whichwould be failure to DMV as a whole. In spite of overhaul budget,going overboard it would be a game changer in safety of roads. Inessence, funds may be unavailable to implement highest standards ofroad safety but with this technique that will be a solved problem.

DMV managers should come up with measures to make sure all techniquesused are taken up well by consumers of services provided. Planningtherefore is crucial in such a turnover to make maximum use ofavailable resources (Hofstede, 2012 Garrison et al, 2010). Motorinsurance unless put to a compulsory state many vehicle owners seemto be reluctant on the issue, which no one knows when accidents mayoccur. Government thus plays its part to ensure all vehicles areinsured and checkups are regular to ensure roadworthiness perfection.

References

Hofstede, G. H. (Ed.). (2012).&nbspThe game of budget control.Routledge.

Garrison, R. H., Noreen, E. W., Brewer, P. C., &amp McGowan, A.(2010). Managerial accounting.&nbspIssues in AccountingEducation,&nbsp25(4), 792-793.