Mr Chandler, the production supervisor, bursts into your office, carrying the company's 2014 performance report and thundering. "There is villainy here sir! And I shall get to the bottom of it. I will not stop searching until I have found the answer! Why is Mr. Richards so down on my department? I thought we did a good job last year. But Richards claims my production people and I cost the company $31,500! I plead with you, sir, explain this performance report to me." Trying to calm Chandler down, you take the report from him and ask to be left alone for 15 minutes. The report is as follows:

Evaluate the performance report. Is Mr. Richards correct, or is there "villainy here?"
Assume that the Sales Department is a profit center and that the Production and Administration Departments are cost centers. Determine the responsibility of each for cost, revenue and income variances and prepare a report reconciling budgeted and actual net income. Your report should focus on the performance of each responsibility center.

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DICKENS COMPANY, LIMITED Performance Report For Year 2014 Budget Actual Variance Unit Sales 5,000 7,500 Sales Less Manufacturing Costs 225,000 262,500 37,500 F 24 2$ Direct Materials 55,500 48,000 47,500 32,500 8,000 U 15,500 U Direct Labour Manufacturing Overhead Total Gross Profit Less Selling and Admin Expenses| Selling (all fixed) Administrative (all Fixed) Total Net Income Performance Summary Budgeted Net Income Sales Department Variance 40,000 143,500 119,000 32,000* 112,000 113,000 24 8,000 U 31,500 U 6,000 F -S -$ -$ 24 24 57,800 40,000 17,800 U 55,000 112,800 6,200 50,000 90,000 23,000 5,000 U 22,800 16,800 U -S -$ 23,000 37,500 F 17,800 U $ Sales Revenue 19,700 F 5,000 U 31,500 U $ Selling Expenses Admin Department Variances Production Department Variances Actual Net Income 16,800 U 6,200 %24 %24 %24