Budgetary control question

Budgetary Control 2 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

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 brought to the attention of each manager. C. What’s your overall recommendation to top management in term of the performance of the three managers? D. 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?