CMA Adapted—Responsibility Accounting Family Resorts, Inc., is a holding company for several vacation hotels in the northeastern and mid-Atlantic states. The firm originally purchased several old inns, restored the buildings, and upgraded the recreational facilities. Vacationing families have been well pleased with the inns because many services are provided that accommodate children and afford parents time for themselves. Since the completion of the restoration 10 years ago, the company has been profitable.

Family Resorts has just concluded its annual meeting of regional and district managers.

This meeting is held each November to review the results of the previous season and to help the managers prepare for the upcoming year. Before the meeting, the managers submitted proposed budgets for their districts or regions as appropriate.

These budgets are reviewed and consolidated into an annual operating budget for the entire company. The 2008 budget has been presented at the meeting, and the managers accepted it.

To evaluate the performance of its managers, Family Resorts uses responsibility accounting. Therefore, the preparation of the budget is given close attention at headquarters.
If major changes need to be made to the budgets that the managers submitted, all affected parties are consulted before the changes are incorporated. The following pages present two reports from the budget booklet that all managers received at the meeting.
Required:

a. Responsibility accounting has been used effectively by many companies, both large and small.

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Problem 16: Responsibility Accounting FAMILY RESORTS, INC. CONDENSED OPERATING BUDGET-MAINE DISTRICT FOR THE YEAR ENDING DECEMBER 31, 2008 ($000 OMITTED) Region New England District Maine District Inns Family Resorts Mid- Atlantic New England Allocated Not Vermont New Hampshire Maine Not Allocated Camden Harbor Country Net sales Cost of sales $7,900 4,530 $4,200 $3,700 2,310 2,220 $1,400 840 $1,200 720 $1,100 $600 $500 660 360 300 Gross margin $3,370 $1,890 $1,480 $ 560 $ 480 $ 440 $240 $200 Controllable expenses: Supervisory $ 240 $ 130 $ 110 $ 35 Training 160 80 Advertising 500 280 80 220 $ 50 Repairs and maintenance 480 225 255 90 1888 $ 30 30 55 88 $ 45 $10 $20 $ 15 25 25 15 10 60 55 15 20 20 Total controllable expenses $1,380 $ 715 $ 665 $ 50 $ 210 Controllable contribution $1,990 $1,175 $ 815 $(50) $ 350 8 90 80 40 40 $ 200 $ 280 $ 205 $ 235 $ 25 $(25) $ 95 $ 85 $145 $115 Expenses controlled by others: Depreciation $ 520 $ 300 $ 220 $ 30 70 $ 60 $ 69 Property taxes Insurance 200 300 120 150 80 150 30 30 50 50 828 60 $ 10 20 50 Total expenses controlled by others $1,020 $ 570 $ 450 $30 $ 150 $ 140 $ 130 $ 10 Total contribution $ 970 $ 605 $ 365 $(80) $ 200 $ 140 $ 105 $(35) 8 88 $ 20 10 25 | $ 65 $ 55 $ 60 Unallocated costs 160 Income before taxes $ 810 1Unallocated expenses include a regional advertising campaign and equipment used by the regional manager. 2Unallocated expenses include a portion of the district manager's salary, district promotion costs, and a district manager's car. 3Unallocated costs include taxes on undeveloped real estate, headquarters' expense, legal fees, and audit fees.