One subunit of Pike Sports Company had the following financial results last month: (Click the icon to view the financial results.) Read the revient Requirement 1. Complete the performance evaluation report for this subunit. Enter the variance percent as a percentage of the budgeted amount rounded to two places. (Enter a variance for each account as a positive number, and select whether the variance is favorable [F] or unfavorable [U]. For any zero variances, enter a in the variance column and then leave the For U box blank. Enter the variance percent as a percentage rounded to two decimal places, XXX%.) Actual Flexible Flexible Budget Pike - Subunit X Results Budget Variance (For U) Data Table Direct Materials $ 28,900 $ 27.000 Direct Labor 13,300 13,900 Indirect Labor 26,600 23.500 Actual Flexible Budget % Variance Utilities 12.900 11,900 Pike-Subunit x Results Flexible Budget Variance (F or U) (For U) Depreciation 25,000 25,000 Direct Materials $ 28,900 $ 27.000 Repairs and Maintenance 5,100 6,000 Direct Labor 13,300 13.900 $ Total 111,800 $ 107,300 Indirect Labor 26,600 23,500 Utilities 12.900 11.900 Depreciation 25.000 25.000 5.100 6,000 Repairs and Maintenance Total $ 111,800 $ 107,300 Print Done Requirement 1. Complete the performance evaluation report for this subunit. Enter the variance percent as a percentage of the budgeted amount rounded to two decimal places Responsibility accounting performance reports capture the financial performance of cost, revenue, and profit centers. Responsibility accounting performance reports compare actual results with budgeted amounts and display a variance, or difference, between the two amounts Begin by calculating the variance between the actual and budgeted amounts. Enter the variance as a positive number. Next, select whether each variance is unfavorable or favorable. An unfavorable variance occurs when actual costs are greater than budgeted costs. A favorable variance occurs when actual costs are less than budgeted costs. (Enter a variance for each account and select whether the variance is favorable (F) or unfavorable (U). For any zero variances, enter a in the variance column and then leave the U or F box % Varia (For Actual Flexible Flexible Budget Pike - Subunit X Results Budget Variance (For U) Direct Materials $ 28,800 $ 26,800 $ 2,000 u Direct Labor 13,900 14,500 600 F Indirect Labor 27,000 23,500 3,500 u Utilities 12,100 11,300 800 U Depreciation 27,000 27,000 Repairs and Maintenance 4,400 5,500 1,100 Total $ 113,200 $ 108,600 4,600 Next, we need to calculate the % variance. To do so, we use the following formula: flexible budget variance/ flexible budget x 100. Remember, we want to know the percent of the variance to the budget, so the budget is our denominator, not the actual amount. We will walk through the direct materials % variance calculation first: (Enter the percent rounded to two decimal places, X.XX%.) Flexible Budget Variance ! Flexible Budget % Variance $ 2,000 26,800 7.46 % S % Now let's enter the % variance for all the other accounts, including the total, using the formula above and identify whether each variance is favorable or unfavorable. (Enter a variance for each account and select whether the variance is unfavorable [U] or favorable (F). For any zero variances, enter a 0 in the variance column and then leave the U or F box blank, Round the percentages to two decimal places, X.XX%) Actual Flexible Flexible Budget % Variance Pike - Subunit X Results Budget Variance (For U) (F or U) Direct Materials $ 28,800 $ 26,800 $ 2,000 7.46 % U Direct Labor 13,900 14,500 600 F F Indirect Labor 27,000 23,500 3,500U 14.89 % Utilities 12,100 11,300 800 U 7.08% Depreciation 27,000 27,000 0 % Repairs and Maintenance 4,400 5,500 1,100 F 20.00 % $ 113,200 $ 108,600 4,600 4.24 Total U U 4.14 % U $ 0 F % Requirement 2. Based on the data presented, what type of responsibility center is this subunit? Because cost centers are only responsible for controlling costs, their performance reports only include information on actual versus budgeted costs. Likewise, performance reports for revenue centers only contain actual versus budgeted revenue. However, profit centers are responsible for both controlling costs and generating revenue. Therefore, their performance reports contain actual and budgeted information on both their revenues and costs. What type of responsibility center is this unit? Requirement 3. Which items should be investigated it part of management's decision criteria is to investigate all variances exceeding $2,500 or 10%? Examine the budget variance and % variance columns in the performance report you prepared above. Which items showed variances exceeding $2,500 or 10%? Requirement 4. Should only unfavorable variances be investigated? Management by exception is a management technique that directs attention to important differences between actual and budgeted amounts. Managers investigate large favorable variances (not just large unfavorable ones). They want to identify the reason for exceptional results, so that other parts of the organization may also benefit. Also, a favorable expense variance could indicate costs are being cut that might impact future operations in a negative way