(Divisional profit) Conroe Division of the Southwest Fabrics Company produces and markets floor covering products to wholesalers...
Question:
(Divisional profit) Conroe Division of the Southwest Fabrics Company produces and markets floor covering products to wholesalers in Texas, New Mexico, Ar¬ izona, and California. The manager of Conroe is Michael Wilson. Southwest Fabrics evaluates all its division managers on the basis of a comparison of budg¬ eted profit to actual profit achieved. The profit measure used is pretax income. For 1998, the budgeted income for Conroe was as follows:
a. Based on the preceding information, evaluate the performance ol the Conroe Division. What was the principal reason for the poor profit performance?
b. Why do complete income statements provide a more complete basis to eval¬ uate the profit performance of a manager than mere comparisons of the bottom lines of the budgeted and actual income statements?
PART' VII Performance Evaluation
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