Duit plc has recently acquired Ucando Ltd which is a regional builders' merchants/DIY company with three outlets all within a radius of 40 miles. Duit plc is building up its national coverage of outlets. Duit plc has set up regional companies each with its own board of directors responsible to the main board situated in London.
It is expected that eventually each regional company will have between 10 and 20 outlets under its control. A regional company will take over control of the three Ucando Ltd outlets. Each outlet will have its own manager, and new ones have just been appointed to the three Ucando Ltd outlets.
The outlets' managers will be allowed to hire and fire whatever staff they need and the introduction of a head count budget is being considered by head office. Each outlet manager is responsible for his own sales policy, pricing, store layout, advertising, the general running of the outlet and the purchasing of goods for resale, subject to the recommendations below. Duit plc's policy is that all outlet managers have to apply to the regional board for all items of capital expenditure greater than £500, while the regional board can sanction up to £100 000 per capital expenditure project.
The outlets will vary in size of operations, and this will determine the number of trade sales representatives employed per outlet. There will be a minimum of one trade sales representative per outlet under the direction of the outlet manager. Each manager and representative will be entitled to a company car.
Outlet sales are made to both retail and trade on either cash or credit terms. Debtor and cash control is the responsibility of regional office. Cash received is banked locally, and immediately credited to the head office account. Credit sales invoices are raised by the outlet with a copy sent to regional office. Within each outlet it is possible to identify the sales origin, e.g. timber yard, saw mill, building supplies, kitchen furniture, etc. Timber for resale is supplied to an outlet on request from stocks held at regional office or direct from the ports where Duit (Timber Importers) Ltd has further stocks. Duit Kitchens Ltd provides kitchen furniture that the outlets sell. Duit plc also has a small factory making windows, doors and frames which are sold through the outlets. When purchasing other products for resale, the outlet is requested to use suppliers with which head office has negotiated discount buying arrangements. All invoices for outlet purchases and overheads are passed by the respective outlet manager before being paid by regional office. In existing Duit outlets a perpetual inventory system is used, with a complete physical check once a year.
Information concerning last year's actual results for one of Ucando Ltd's outlets situated at Birport is given below:

Position at 31 March
(£)
Debtors 100 900
Stock 512 000
1 Sales can be identified by till code: cash/credit, trade/ retail, timber, kitchen furniture, frames, heavy building supplies, light building supplies, sawmill etc.
2 Workforce distributed as follows: timber yard (3), sawmill (1), sales (7), general duties (1), administration (3).
3 Paid to sales representatives (2), assistant manager, manager.
4 Equipment used in sales area, sawmill, yard.
(a) Describe a cost centre, a profit centre and an investment centre and discuss the problems of and benefits from using them for management accounting purposes.
(b) Suggest key performance indicators which can be used either individually or jointly by each member of the management team for the regional outlet network, i.e. those in the regional office, the outlets and their departments, in a responsibility reporting system for their evaluation purposes.
(c) Justify the key performance indicators that you have suggested in (b) incorporating, where appropriate, reference to whether the individuals or entities are being treated as cost, profit or investment centres.
(d) Design a pro forma monthly report without figures which can be used by both the outlet manager for his management and control needs and by the regional board to evaluate the outlet.
The report can include two or more sections if you wish. Provide a brief explanation for the format chosen.
The manufacturing companies and the importing company report direct to the main board.

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Birport DIY outlet Trading and profit and loss account for year to 31 March Sales (1) Less cost of sales Prime gross margin (29%) Less Wages (2) Salaries (3) Depreciation: 1543 000 447 470 87 400 45 000 9100 3 500 6 500 6170 6 510 3 100 9 350 9 180 3 490 7 770 9 440 25 160 6000 13 420 10 580 equipment (4) buildings vehicles (3 cars) Vehicle running expenses Leasing of delivery lorry Lorry running expenses Energy costs Telephone/stationery Travel and entertaining Commission on sales Bad debts written off Advertising Repairs Rates, insurance Sundry expenses Delivery expenses 269 07O £178 400 Net profit (11.56%)