PROBLEM 1-4. Performance Reports Below is a performance report that compares budgeted and actual profit in the children's clothing department of Newport Beach Department Store for the month of December.

Newport Beach Department Store Children's Clothing Performance Report December 2006 Budget Actual Difference Sales $400,000 $450,000 $50,000 Less:

Cost of merchandise 200,000 270,000 70,000 Salaries of sales staff 40,000 44,000 4,000 Controllable profit $160,000 $136,000 ($24,000)

Required

a. Evaluate the department in terms of its increases in sales and expenses. Do you believe it would be useful to investigate either or both of the increases in expenses?

b. Consider storewide electricity cost. Would this cost be a controllable or a noncontrollable cost for the manager of children's clothing? Would it be useful to include a share of storewide electricity cost on the performance report for children's clothing?