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Revenue Centers

The sales manager for The Unknown Comic might manage a revenue center, because the sales manager is responsible for generating revenue. The manager of an online reservation center for a major hotel chain and the director of admissions of a university would also manage revenue centers. You would not ignore costs that could be controlled by the sales manager, but your main focus would be on the generation of revenue.

You would use a portion of the flexible budget performance report to evaluate the performance of the sales manager. The flexible budget performance report for the sales department is shown below:

Based on your analysis of sales earlier, you found that the company sold a total of $19,200 more than expected. You can break down this number as follows:

• $25,200 more was earned due to the fact that the actual selling price per unit, $34.00, was higher than the estimated selling price per unit, $30.00.
• $6,000 of potential revenue was lost, because the company sold 200 fewer units than expected.

You would review this information and try to determine whether the increase in price caused the reduction in sales or whether the sales department fell short in its goal of selling 6,500 units.