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U 1,2, 3 valuating Profit and Investment Center Performance P3. Th acquisition and disposal decisions for the firm. As managing partner, partners in charge of

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U 1,2, 3 valuating Profit and Investment Center Performance P3. Th acquisition and disposal decisions for the firm. As managing partner, partners in charge of the firm's three branch offices. Those part RATIO managing partner of the law firm Sewell, Bagan, and Clark, LLP, makes asset she supervises the ners have the authority ployce compensation decisions. The partners compensation depends on the SPREADSHEET tween actual and to make e income: $1.900u profitability of their branch office. Vanessa Smith manages the City Branch, ween income: $1,800U ving master budget and actual results for the year ended December 31. Master Budget Actual Results Billed hours Revenue Controllable variable costs 5,000 4,900 250,000 254,800 Direct labor Variable overhead 120,000) (90,000) 90,000 137.200) (34,300) 83,300 Contribution margin Controllable fixed costs: Rent Other administrative expenses (30,000) (45,000) 15,000 (30,000) (42,000) $ 11,300 Branch operating income REQUIRED 1. Assume that the City Branch is a profit center. Prepare a performance report that includes a flexible budget. Determine the variances between actual results, the flex ible budget, and the master budget. 2. ACCOUNTING CONNECTIONEvaluate Vanessa Smith's performance as manager of the City Branch. 3. Assume that the branch managers are assigned responsibility for capital expenditures and that the branches are thus investment centers. City Branch is expected to gener- ate a desired ROI of at least 30 percent on average invested assets of $40,000. a. Compute the branch's return on investment and residual income. (Round per- centages to two decimal places.) b. ACCOUNTING CONNECTIONUsing the ROI and residual income, evaluate Vanessa Smith's performance as branch manager

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