MA23-45. 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 Variance Budget 7,500 Unit sales 9,000 $526,500 $450,000 $ 76,500 F Sales. Less manufacturing costs Direct materials Direct labor Manufacturing overhead. Total Gross profit Less selling and administrative expenses Selling (all fixed) Administrative (all fixed) Total Net income 42.750 19,350 192,100 (254,200) 272,300 37.500 15.000 190,000 (242,500) 207,500 5,250 U 4.350 U 2.100 U (11.700) U 64,800 F 52.750 54.785 (107.535) $164,765 50,000 50,000 (100.000) $107.500 2.750 U 4,785 U (7,535) U $ 57,265 F $107,500 Performance summary Budgeted net income Sales department variances Sales revenue Selling expenses Administration department variances Production department variances, Actual net income $ 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 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 focus on the performance of each responsibility center. MA23-45. 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 Variance Budget 7,500 Unit sales 9,000 $526,500 $450,000 $ 76,500 F Sales. Less manufacturing costs Direct materials Direct labor Manufacturing overhead. Total Gross profit Less selling and administrative expenses Selling (all fixed) Administrative (all fixed) Total Net income 42.750 19,350 192,100 (254,200) 272,300 37.500 15.000 190,000 (242,500) 207,500 5,250 U 4.350 U 2.100 U (11.700) U 64,800 F 52.750 54.785 (107.535) $164,765 50,000 50,000 (100.000) $107.500 2.750 U 4,785 U (7,535) U $ 57,265 F $107,500 Performance summary Budgeted net income Sales department variances Sales revenue Selling expenses Administration department variances Production department variances, Actual net income $ 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 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 focus on the performance of each responsibility center
