Divisional Responsibility and Performance (CMA) George Johnson was hired on July 1, 19_9, as Assistant General Manager of the Botel Division of Staple, Inc. It was understood that he would be elevated to general manager of the division on January 1, 19_1, when the then current general manager retired, and this was duly done. In addition to becoming acquainted with the division and the general manager’s duties, Mr. Johnson was specifically charged with the responsibility for development of the 190 and 19_1 budgets. As general manager in 19_1, he was, obviously, responsible for the 19_2 budget.

The Staple Company is a multiproduct company that is highly decentralized. Each division is quite autonomous. The corporation staff approves division prepared operating budgets but seldom makes major changes in them.

The corporate staff actively participates in decisions requiring capital investment (for expansion or replacement) and makes the final decisions. The divi- sion management is responsible for implementing the capital program. The major method used by the Staple Corporation to measure division perfor- mance is Contribution Return on Division Net Investment. The budgets presented below were approved by the corporation. Revision of the 19_2 bud- get is not considered necessary even though 19_1 actually departed from the approved 19_1 budget.

BOTEL DIVISION (000’S OMITTED)
Accounts 3 Actual Budget 19.9 190 191 19.4 19.2 Sales 1,000 1,500 1,800 2,000 2,400 Less Division variable costs:
Material and labor 250 SiS 450 500 600 Repairs 50 75 50 100 120 Supplies 20 30 36 40 48 Less Division fixed costs:
Employee training 30 35 7X3) 40 45 Maintenance 50 55 40 60 70 Depreciation 120 160 160 200 200 Rent 80 100 110 140 140 Total 600 830 871 1,080 1,223 Division net contribution 400 670 929 920 Well ZV Division investment:
Accounts receivable 100 150 180 200 240 Inventory 200 300 270 400 480 Fixed assets 1,590 2,565 2,800 3,380 4,000 Less: Accounts and wages payable (150) (225) (350) (300) (360)
Net Investment 1,740 2,790 2,900 3,680 4,360 Contribution return on net investment 23% 24% 32% 25% 27%
1. Identify Mr. Johnson’s responsibilities under the management and measurement program described above.
2. Appraise the performance of Mr. Johnson in 19_1.
3. Recommend to the president any changes in the responsibilities assigned to managers or in the measurement methods used to evaluate division management based upon your analysis.