1.

a. Using the information in the case and Tables 1-5, prepare a flexible budget8 for the Berkshire Toy Company for the year ended June 30, 1998. Analyze the company's total master (static) budget variance for the year.

Compare the flexible and master (static) budgets and prepare a schedule showing the sales volume variance. Compare the actual results and the flexible budget, and prepare a schedule

showing the flexible budget variance. Subdivide the flexible budget variances into the appropriate price (rate or spending) and efficiency (usage or quantity) variances for materials, labor, and variable overhead.

b. Compute the bonuses earned in fiscal 1998, if any, by David Hall of the purchasing department, Rita Smith of the marketing department, and Bill Wilford of the production department.

2.a. You will be assisting in the investigation of certain variances. Using the information provided, formulate some likely explanations for the observed variances. b. Comment on the advantages and disadvantages of the incentive compensation plan as it applies to department heads. What is the appropriate role of the budget in performance evaluation? What modifications to the incentive plan would you recommend? Why?

3.Suppose that Berkshire Toy Company adopts a balanced scorecard (BSC) to measure its performance. What performance dimensions are typically included in a BSC? What specific performance measures (indicators) might be included in the scorecard? For useful background information on BSCs, see Forsythe et al. (1999, 13-18).

Depending on your variance analysis already completed for you. You should refer to the facts in the case and the variance analysis to respond to the questions.

4.What are the two primary factors responsible for the disappointing profits?

5.Evaluate the performance of David Hall (purchasing), Rita Smith (marketing) and Bill Wilford (production) by briefly discussingone primary positive and one primary negativeaspect of each person's performance.