Performance evaluation (30 marks) - Use the following tables to answer the questions below on performance evaluation. The first table is the budget, and the second table is the actual results for the year. Round amounts to dollars and percentages to one decimal. Budget Sales Total 10,000,000 Plant A 3,000,000 Plant B 1,500,000 Direct Material (Note 1) Direct Labour (Note 1) 2,000,000 2,500,000 1,000,000 500,000 Plant C 5,500,000 500,000 750,000 500,000 1,250,000 Factory Overhead 1,500,000 250,000 200,000 1,050,000 Cost of Goods Sold 6,000,000 2,000,000 1,200,000 2,800,000 Dept 1 Dept 2 750,000 1,250,000 500,000 700,000 1,200,000 1,600,000 Gross Profit 4,000,000 1,000,000 300,000 Advertising 100,000 Allocated 25,000 25,000 2,700,000 50,000 Selling 750,000 Allocated 250,000 200,000 300,000 Corporate 750,000 Allocated 250,000 50,000 450,000 Period Expenses 1,600,000 525,000 275,000 800,000 Operating Profit 2,400,000 475,000 25,000 1,900,000 Taxes 600,000 Net Income Invested Assets 1,800,000 10,000,000 3,000,000 1,500,000 5,500,000 Note 1 Price Volume Total Direct Material $ 10.00 Direct Labour $ 20.00 200,000 units 125,000 hours 2,000,000 2,500,000 Note that there are several cost centers, profit centers and investment centers in the budget and actuals results. The "Total" column is the entire company managed by a chief executive officer while Plants, Departments (e.g., Dept 1 and 2) and specific period costs are managed by other managers given their assigned responsibilities. Within the Plants, there are two departments per Plant (i.e., Plant A has departments 1 and 2 and Plant B also has departments 1 and 2, separately managed). Period costs are allocated based on an activity based accounting driver and are not separate cost centers within the Plants. The company manages with four investments centers, four profit centers and nine costs centers. 2 Actual Total Plant A Sales 11,000,000 3,200,000 Plant B 1,400,000 Plant C 6,400,000 Direct Material (Note 2) 2,100,000 1,100,000 400,000 600,000 Direct Labour (Note 2) 3,000,000 800,000 500,000 1,700,000 Factory Overhead 1,700,000 300,000 250,000 1,150,000 Cost of Goods Sold 6,800,000 2,200,000 1,150,000 3,450,000 Dept 1 Dept 2 700,000 1,500,000 600,000 550,000 1,300,000 2,150,000 Gross Profit 4,200,000 Advertising 150,000 1,000,000 25,000 250,000 25,000 2,950,000 100,000 Selling 800,000 300,000 125,000 375,000 Corporate 725,000 250,000 25,000 450,000 Period Expenses Operating Profit Taxes Net Income 1,675,000 575,000 175,000 925,000 2,525,000 425,000 75,000 2,025,000 Invested Assets 635,000 1,890,000 11,000,000 3,000,000 1,500,000 6,500,000 Note 2 Price Volume Direct Material $ 12.00 Direct Labour $ 15.00 175,000 units 200,000 hours Total 2,100,000 3,000,000 Questions 1. Prepare a budget to actual analysis for the Total company and its three Plant profit centers comparing operating profits. 2. Prepare a budget to actual analysis for the nine cost centers of the company. Questions 1. Prepare a budget to actual analysis for the Total company and its three Plant profit centers comparing operating profits. 2. Prepare a budget to actual analysis for the nine cost centers of the company. 3. Prepare a return on investment (ROI) calculation for the Total company and the three Plants using the expanded formula which shows the components of ROI. 4. Prepare a residual income analysis for the three Plants assuming that the required return for the Plants is 15%. 5. Prepare a variance analysis for direct material and direct labour indicating price and volume variances. 6. Name which cost centers, profit centers and investment centers did not perform well for the year. How would you assess the direct labour results? What went wrong with direct labour