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MA23-45. Evaluating a Companywide Performance Report LO8 Mr. Chandler, the production supervisor, bursts into your office, carrying the company's 2017 per- formance 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 department? I thought we did a good job last year. But Richards claims my production people and I cost the company S31,500! I plead with you, sir, explain this performance report to me." Trying to calm Chandler. 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 Year 2017 Actual Budget Variance Unit sales. 7,500 5,000 262,300 $223,000 55,500 S37,500 Sales Less manufacturing costs Direct materials Direct labor Manufacturing overhead 47,500 32,500 8,000 U 15,300 U 48,000 40,000 8,000 U Total Gross proft Less selling and administrative expenses 143.500) (112.000) 31.500) U 119,000 57800 (112.800) 113,000 6,000 F Selling (all fixed) 40,000 17,800 U Administrative (all fixed) Total Net income Performance summary 55,000 50,000 5,000 U (90.000) (22.800) : $ 6.200 23,000 $16.800 U $23,000 Sales department variances Sales revenue S 37,500F 5,000 U 31,300 U 16,800 U S 6.200 Actual net income Includes fixed manafactaring overhead of $22 ,000 Module 23 Standard Costs and Performance Reports 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 LO8 Mr. Chandler, the production supervisor, bursts into your office, carrying the company's 2017 per- formance 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 department? I thought we did a good job last year. But Richards claims my production people and I cost the company S31,500! I plead with you, sir, explain this performance report to me." Trying to calm Chandler. 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 Year 2017 Actual Budget Variance Unit sales. 7,500 5,000 262,300 $223,000 55,500 S37,500 Sales Less manufacturing costs Direct materials Direct labor Manufacturing overhead 47,500 32,500 8,000 U 15,300 U 48,000 40,000 8,000 U Total Gross proft Less selling and administrative expenses 143.500) (112.000) 31.500) U 119,000 57800 (112.800) 113,000 6,000 F Selling (all fixed) 40,000 17,800 U Administrative (all fixed) Total Net income Performance summary 55,000 50,000 5,000 U (90.000) (22.800) : $ 6.200 23,000 $16.800 U $23,000 Sales department variances Sales revenue S 37,500F 5,000 U 31,300 U 16,800 U S 6.200 Actual net income Includes fixed manafactaring overhead of $22 ,000 Module 23 Standard Costs and Performance Reports 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

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