One subunit of Soaring Sports Company had the following financial results last month:

Read the requirement

.

A	B	C	D	E
1	Soaring Sports Manufacturing Company—Team Sports Subunit
2	Monthly Performance Report
3	For the Month
4		Actual	Budgeted	Variance*	Variance Percentage*
5	Sales	$543,000	$500,000
6	Less: Variable expenses	310,500	300,000
7	Contribution margin	$232,500	$200,000
8	Less: Direct fixed expenses	78,450	75,000
9	Segment margin	$154,050	$125,000
10	Less: Common fixed expenses	48,000	37,500
11	Operating income	$106,050	$87,500

*Be sure to indicate whether each variance is favorable (F) or unfavorable (U).

Requirement 1. Complete the performance evaluation report for this subunit (round to three decimal places). (Enter a variance for each account and select whether the variance is unfavorable (U) or favorable (F). Enter the results as positive numbers. Enter the variance percents as a percentage to three decimal places, "XX.XXX%".)

Soaring Sports Company—Team Sports Subunit

Monthly Performance Report

For the Month

Product

Actual

Budgeted

Variance

Sales

$543,000

$500,000

43,000

F

Less: Variable expenses

310,500

300,000

10,500

U

Contribution margin

$232,500

$200,000

32,500

F

Less: Direct fixed expenses

78,450

75,000

3,450

U

Segment margin

$154,050

$125,000

29,050

F

Less: Common fixed expenses

48,000

37,500

10,500

U

Operating income

$106,050

$87,500

18,550

F

Variance

Percentage

8.600

%

F

3.500

%

U

16.250

%

F

4.600

%

U

23.240

%

F

28.000

%

U

21.200

%

F

Requirement 2. Based on the data presented, what type of responsibility center is this subunit?

This performance report includes both revenue and cost data, therefore this subunit must be a profit center.

Requirement 3. Which items should be investigated if part of management's decision criteria is to investigate all variances equal to or exceeding

$10,500

and exceeding

10%

(both criteria must be met)? (If an input field is not used in the table, leave the input field empty; do not select a label.)

Common fixed expenses

Requirement 4. Should only unfavorable variances be investigated? Explain.

Managers should investigate favorable as well as unfavorable variances.

Favorable variances

▼

Management needs to evaluate large favorable as well as unfavorable variances to determine the root cause of the variance.

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

The flexible budget variances

▼

due to sales volume differences between budget and actual. Differences in sales volume are captured by the

▼

flexible budget.

revenue center performance report.

volume variance, not the flexible budget.

The flexible budget variance is due to

▼

something other than volume.

volume variances.

Requirement 6. Do you think management will place equal weight on each of the

$10,500

variances? Explain.Management will

▼

not place as much weight on the variable expenses variance because it does not exceed 10%.

place equal weight on both variances.

place more weight on the variable expenses variance.

Additionally, they may not place much weight on

▼

cost of sales variance

the common fixed expenses

the revenue variance

the volume variance

because

▼

this is a direct cost of the subunit

this is not a direct cost of the subunit.

the overall variance is insignificant

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

The performance report addresses the

▼

customer

financial

internal business

learning and growth

perspective of the balanced scorecard.

▼

Customer

Financial

Internal business

Learning and growth

performance measures tend to be

▼

lag

lead

indicators. They typically

▼

forcast future performance.

measure the results of past decisions.

Requirement 8. Give one key performance indicator for the other three balanced scorecard perspectives. Indicate which perspective is being addressed by the indicators you list. Are they lead or lag indicators? Explain.

Complete the following table to identify one key performance indicator for the three other balanced scorecard perspectives.

Balanced scorecard perspective

Key performance indicator

Are they lead or lag indicators? Explain.

Each of these performance measures is a

▼

lag

lead

indicator which tend to

▼

forecast future performance.

measure the results of past decisions.

The performance indicators listed above are often better at

▼

projecting future performance than past financial data.

providing real time information.

reporting on past financial data than projecting future performance.