Assignment: Budgetary Control
Castle Company manufactures expensive watch cases that are sold as souvenirs. Customers can only purchase the watch cases in Castle's retail stores or the outlet stores. Currently, Castle's products are not available online. Three of its sales departments are retail sales, wholesale sales, and outlet sales. The retail sales department is a profit centre. The wholesale sales department is a cost centre; its managers merely take orders from customers who purchase through the company's wholesale catalogue. The outlet sales department is an investment centre, because each manager is given full responsibility for an outlet store location. The manager can hire and dismiss employees; purchase, maintain, and sell equipment; and in general is fairly independent of company control.
Sara Sutton is a manager in the retail sales department. Gilbert Kazmierski manages the wholesale sales department. José Lopez manages the Club Cartier outlet store in Montreal. The following are the budget responsibility reports for each of the three departments:
|
Budget
|
|
|
Retail Sales
|
Wholesale Sales
|
Outlet Sales
|
|
Sales
|
$ 750,000
|
$ 400,000
|
$200,000
|
|
Variable costs
|
|
|
|
|
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
|
$ 750,000
|
$ 400,000
|
$200,000
|
|
Variable costs
|
|
|
|
|
Cost of goods sold
|
195,000
|
120,000
|
26,250
|
|
Advertising
|
100,000
|
30,000
|
5,000
|
|
Sales salaries
|
75,000
|
15,000
|
3,000
|
|
Printing
|
10,000
|
20,000
|
5,000
|
|
Actual Results
|
|
Travel
|
15,000
|
20,000
|
1,500
|
|
Fixed costs
|
|
|
|
|
Rent
|
40,000
|
50,000
|
12,000
|
|
Insurance
|
5,000
|
2,000
|
1,000
|
|
Depreciation
|
80,000
|
90,000
|
60,000
|
|
Investment in assets
|
1,000,000
|
1,200,000
|
800,000
|
Instructions
1) Determine which of the items should be included in the responsibility report for each of the three managers.
2) Compare the budgeted measures with the actual results. Decide which results should be brought to the attention of each manager.
3) What's your overall recommendation to top management in term of the performance of the three managers?
4) In considering the competition from the online shopping platforms, what are the PEST(Political, Economic, Sociological and Technological) factors the top management needs to consider?
Format your assignment according to the following formatting requirements:
(1) The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
(2) The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
(3) Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.