Jen and Berry's sells ice-creams from its factory-shop in Petone. There is a managing director (Maynard Dibble), a marketing manager (Mary Salman) and a production manager (Peter Pritchard). Maynard uses variance analysis to evaluate the performance of his two managers. Maynard has delegated the task of setting the main budget to Mary, as she is the best informed about the market for ice-cream. Mary sets the static budget once a year, using an incremental budgeting system. "Given the predictability of the market, I use last year's budgetary information and make small adjustments to arrive to this year's budget. I'm responsible for volume variances, Peter is responsible for the flexed budget variances. This system works, and it is easy to understand." Jen and Berry's has a market share of 40%, but the market share has come under pressure lately; a year ago it was 41%. The total size of the market for the type of ice-cream sold by Jen and Berry's at the start of the budget year was $ 70,611, at the end of the year it was $ 75,810. Maynard receives the information for the year 2018 from Mary, who is happy to show that she did really well (Table 1). "So, if I understand this information correctly. then you did well, but Peter didn't do very well", comments Maynard sceptically. "Exactly", replies Mary. "...so I decided to book a family holiday to the Europe." Manufacturing Delivery Advertising Selling Admin Variable costs Milk Sugar Income Table 2 presents a break-down of the manufacturing costs. It appears that Peter compensated the unfavourable variances on the use of milk and sugar by economising on the use of flavour and additives. Customers complained about the poor taste of the ice-creams recently. Maynard's solution is to introduce a system that rewards on various non-accounting measures, such as, for example, customer satisfaction and prizes won for the quality of ice-creams. Table 2: Manufacturing Costs (in S) Actual Flexed Flavouring Cartons Table 1: Budget Information for 2018 Static Budget Flexed Budget $20,413 $21,119 2,209 1,737 1,158 1,407 $26,924 $2,027 Plastic Wrap Additives Supplies Misc Fixed Costs Total 11,735 1,957 2,973 1,781 90 738 97 2,389 1,817 1,158 1,407 $27,890 $2,396 9 2,049 21,430 11,456 1,874 3,084 1,780 94 788 110 9 1,924 21.119 Variance -279 -83 111 -1 3 50 13 0 Actual $21,430 2,219 1,908 1,139 1,375 $28,072 $2,252 -125 -311 U U F U F F F F U U Required: Prepare a report for Maynard, Mary, and Peter that addresses the following questions: (3 marks for report format) a) A static budget variance can be broken up into a flexible budget variance and a sales volume variance. For what reasons may one choose to disaggregate a static budget variance in such a way? (6 marks) b) Peter claims that "An excellent way of dealing with variances is to hold a manager responsible only for the variances he really directly controls; that is really fair." Comment on this claim; note, your discussion should discuss the controllability concept. (6 marks) c) Determine the static budget variance, the flexible budget variance, and the sales volume variance. Use your analysis to comment on Marys' performance. Did she really do well? Please explain your answer and show workings. (12 marks) d) Explain why it makes sense to introduce a balanced scorecard for Jen and Berry's. Discuss the expected improvements that a balanced scorecard can bring to Jen and Berry's. (7 marks) [TOTAL OF 34 MARKS]