Compare the budgeted measures with the actual results

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Reference no: EM13888109

Lanier Company manufactures expensive watch cases sold as souvenirs. Three of its sales departments are Retail Sales, Wholesale Sales, and Outlet Sales. The Retail Sales Department is a profit center. The Wholesale Sales Department is a cost center. Its managers merely take orders from customers who purchase through the company's wholesale catalog. The Outlet Sales Depart- ment is an investment center because each manager is given full responsibility for an outlet store location. The manager can hire and discharge employees, purchase, maintain, and sell equipment, and in general is fairly independent of company control.

Mary Gammel is a manager in the Retail Sales Department. Stephen Flott manages the Whole- sale Sales Department. Jose Gomez manages the Golden Gate Club outlet store in San Francisco. The following are the budget responsibility reports for each of the three departments.

Budget

Retail Sales

Wholesale Sales

Outlet Sales

Sales Variable costs

$  750,000

$  400,000

$200,000

Cost of goods sold

150,000

100,000

25,000

Advertising

100,000

30,000

5,000

Sales salaries

75,000

15,000

3,000

Printing

10,000

20,000

5,000

Travel

20,000

30,000

2,000

Fixed costs


 

 

Rent

50,000

30,000

10,000

Insurance

5,000

2,000

1,000

Depreciation

75,000

100,000

40,000

Investment in assets

1,000,000

1,200,000

800,000

Actual Results

Retail Sales

Wholesale Sales

Outlet Sales

Sales Variable costs

$  750,000

$  400,000

$200,000

Cost of goods sold

192,000

122,000

26,500

Advertising

100,000

30,000

5,000

Sales salaries

75,000

15,000

3,000

Printing

10,000

20,000

5,000

Travel

14,000

21,000

1,500

Fixed costs Rent

40,000

50,000

12,300

Insurance

5,000

2,000

1,000

Depreciation

80,000

90,000

56,000

Investment in assets

1,000,000

1,200,000

800,000

Instructions

(a) Determine which of the items should be included in the responsibility report for each of the three managers.

(b) Compare the budgeted measures with the actual results. Decide which results should be called to the attention of each manager.

Reference no: EM13888109

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