inventory in profit center Ralph manages the manufacture and distribution of a eonsumer product. The investment base is relatively stable, and Ralph is evaluated on the basis of profitability, market share, inventory, and a changing mix of nonfinancial goals that vary with the cir.:umstance. The profit budget is based on a revenue estimate of TR

= 50%, a manufacturing eost estimate of TMC = 300,000 + 14llM and a distribution eost estimate of TDC = 200,000 + 6%. llM refers to units manufactured and qs to units sold. The produet is manufaetured at a fairly steady rate, and inventory is used to absorb random demand fluctuations. Standard, variable eosting is used.

a] The current period budget also calls for production and sale of 25,000 units.

What profit total is budgeted for the period? What is the break-even quantity?

b] During the period Ralph manufaetured 27,000 units and sold 24,000 units.

Manufaeturing eost totaled 695,000 and distribution eost totaled 339,000. The selling price turned out to average 50.2 per unit. Determine the profit in Ralph's profit center. Factor the difference between actual and budgeted profit into as many variances as you can identify. What do you think of Ralph's performance? Why do you think Ralph's inventory is monitored?

AppendixLO1