P-M:7-28A Integrating decentralization and performance evaluation systems One subunit of Racer Sports Company had the following financial results last month:

Subunit X Actual Results Flexible Budget Flexible Budget Variance, F or U % Variance, F or U Net Sales Revenue $476,000 $451,000 blank blank Variable Expenses 261,000, single underline 251,000, single underline blank blank Contribution Margin 215,000 200,000 blank blank Traceable Fixed Expenses 40,000, single underline 26,000, single blank blank Divisional Segment Margin 175,000 double underline 174,000 double underline blank blank

Requirements

1. Complete the performance evaluation report for this subunit (round to two decimal places).

2. Based on the data presented and your knowledge of the company, what type of responsibility center is this subunit?

3. Which items should be investigated if part of managements decision criteria is to investigate all variances equal to or exceeding $8,000 and exceeding 10% (both criteria must be met)?

4. Should only unfavorable variances be investigated? Explain.

5. Is it possible that the variances are due to a higher-than-expected sales volume? Explain.

6. Will management place equal weight on each of the variances exceeding $8,000? Explain.

7. Which balanced scorecard perspective is being addressed through this performance report? In your opinion, is this performance report a lead or a lag indicator? Explain.

8. List one key performance indicator for the three other balanced scorecard perspectives. Make sure to indicate which perspective is being addressed by the indicators you list.