The Peanut Butter Company (PBC) buys peanuts on the world market and produces peanut butter for sale across Canada. The company is headquartered in Toronto where the owners - the Parkin family reside. Allan Parkin is the president of the company, and his brother Steve is the vice-president of Marketing and Business Development. Each brother owns 40% of the stock of PBC. The Parkin Trust established by their father in 2005 holds the remaining shares. The manufacturing of peanut is an effortless process. The peanuts are bought at varying prices on the world markets in advance of the requirement at their processing plants. The procurement department is at the Toronto headquarters, and it distributes the peanuts to their eight plants across Canada. At each of these plants, the peanuts are crushed and then blended with oil, sugar, salt, and various preservatives before being packed into plastic jars. The sales team in Toronto travels the country securing sales with food wholesalers. Once the orders are received, they are divided among the plants (depending on which is closest to the customers and having excess capacity) and are held responsible for ensuring that the promised delivery dates are met. Recently, in a monthly meeting (December 20X1 - prior to establishing budget and performance criteria for 20X2), the plant managers have expressed great concern regarding how they are evaluated and how their yearly bonuses are determined. PBC sets aside a certain amount of money for annual bonuses to all members of the management team. This money is distributed among the company's purchasing agents, salespeople and plant managers based on ability tomeet their budgeted cost and / or revenue targets. The plant managers are treated as prot centers. Their main complaint is concerns with how their net prot is determined. As one plant manager said \"It sure does not seem very fair to me. I do not buy the peanut, nor do I sell them, but I end up being evaluated on both these things.\" See Exhibit 1 for the relevant parts of a typical monthly summary of margins for the rm. The annual targets for the salespeople are set by negotiation between Steve Parkin and the individual salespeople. They usually begin by looking at the sales for the previous year and adjust based on expected changes for the upcoming year. The purchasing agents in Toronto are responsible for buying peanuts that become available on the world market. They typically sign contracts agreeing to accept delivery of a certain grade and quantity of peanuts at a future date. Because the world market price uctuates signicantly, they try to predict what will happen to peanut prices for the upcoming year and buy at the lowest possible cost keeping in mind the need for certain minimum quality levels. During a typical month, the purchasing unit will receive 30 or 40 different shipments of peanuts at varying prices. The peanuts required in the plants are shipped out following inspection and remaining peanuts are sold on the open market. The purchasing units usually have some excess peanuts to sell. They buy more than the plants are expected to use just to be sure that the plants are fully loaded and operating to capacity. The open market price for excess peanuts always exceeds the price paid by PBC and the part of the evaluation of the purchasing unit is based on prot they make on these transactions. Required: Allan Parkin has asked you to investigate the planning, controls, and performance evaluation system currently in place and make recommendations for improvements. 1. Begin by looking into critical success factors for the rm, how the responsibilities are divided among the management team, and 110w the accounting system facilitates performance evaluation. 2. Make some specic recommendations for solving the current concerns expressed by the plant managers. Discuss other relevant qualitative considerations before making recommendations. 3. Develop a high-level Balanced Scorecard for the firm as part of Management Control System, including specific metrics to improve performance.Typical Monthly Operating Results (partial) 20X1 Plant \"A\" * Plant \"B\" * Purchasing Firm's Total Sales Revenue $ 987, 650 $ 964,580 $123,000 $ 7,931,920 100% Expenses: Peanuts 619,750 604,274 73, 659 4,973,755 62.7% Other Ingredients 37,037 36,172 292,836 3.7% Labour 88,889 86,812 702,804 8.9% Variable Overhead 57,778 56,428 456,824 5.8% Fixed Overhead 126,940 128,840 1,022,720 12.9% Total Expenses $930,394 912,526 73,659 7,448,939 93.9% Divisional Margin $ 57,256 52,054 49,341 $ 482,981 6.1% * The revenue and cost data for the other six plants are similar to plants \"A\" and \"B.\