-45. Evaluating a Companywide Performance Report Mr. Chandler, the production supervisor, bursts into your office, carrying the company's prior year 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 depart- ment? 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 Chan- dler, you take the report from him and ask to be left alone for 15 minutes. The report is as follows: DICKENS COMPANY, LIMITED Performance Report For the Prior Year Actual Budget Variance Unit sales Sales.. 9,000 7,500 $526,500 $450,000 $ 76,500 F TE 6 Less manufacturing costs Direct materials.. 42,750 37,500 5,250 U amon Direct labor. 19,350 15,000 4,350 U og Manufacturing overhead. 192,100 190,000* 2,100 U d Total (254,200) (242,500)b(11,700) U Gross profit.. 272,300 207,500 64,800 F Less selling and administrative expenses Selling (all fixed)... 52,750 50,000 2,750 U Administrative (all fixed) 54,78550,000 4,785 U Total (107,535) (100,000) up (7,535) U Net income. $164,765 $107,500 $ 57,265 F Performance summary Budgeted net income Sales department variances Sales revenue. Selling expenses.... Administration department variances Production department variances... Actual net income.. $107,500 $ 76,500 F 2,750 U $ 73,750 F 4,785 U 11,700 U 57,265 F $164,765 *Includes fixed manufacturing overhead of $160,000. mis Required a. Evaluate the performance report. Is Mr. Richards correct, or is there "villainy here"? b. 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 The focus on the performance of each responsibility center. Ters dili onasib