Berkshire Toy Company General Comments About the Case This case provides an opportunity to study the use of cost information for control. We will be working with variances at both the mechanical and interpretive levels. In addition, the case requires you to evaluate a reward system to determine the extent to which it supports goal congruence between the managers and the owners of the firm. Berkshire Toy Company is organized into three departments: purchasing, production and marketing. In addition, they sell the 15-inch Berkshire Bear (the product of interest) through three distribution channels: retail/catalog, internet and wholesale. Because of the more complex setting, the computation of variances is more involved than the computations we did in class. In particular, we will be extending variance analysis to the situation in which sales channel mix (i.e., mix of the three distribution channels) differs from budget. Still, the actual computations of the variances is fairly straightforward. In this cas

1. Complete the spreadsheet template calculating the variances.

2. 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.

3. In your case brief memo, discuss likely explanations for the observed variances. Comment on the highlights of EACH departments performance and the reasons for Berkshires overall poor performance relative to budget