PLEASE SHOW ALL WORK AND EXPLANATION

EXAMPLE ANSWER FORMAT (NUMBERS ARE NOT RELATED TO THIS PROBLEM)!!!

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 0 in the variance column and then leave the U or F box blank.)

	Actual	Flexible	Flexible Budget
Speed - Subunit X	Results	Budget	Variance (F or U)
Direct Materials	$29,100	$27,200	$1,900	U
Direct Labor	13,200	13,700	500	F
Indirect Labor	26,800	23,800	3,000	U
Utilities	12,500	11,700	800	U
Depreciation	28,000	28,000	0
Repairs and Maintenance	4,300	5,400	1,100	F
Total	$113,900	$109,800	4,100	U

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
$1,900	/	$27,200	=	6.99	%

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
Speed - Subunit X	Results	Budget	Variance (F or U)
Direct Materials	$29,100	$27,200	$1,900	U
Direct Labor	13,200	13,700	500	F
Indirect Labor	26,800	23,800	3,000	U
Utilities	12,500	11,700	800	U
Depreciation	28,000	28,000	0
Repairs and Maintenance	4,300	5,400	1,100	F
Total	$113,900	$109,800	4,100	U

% Variance
(F or U)
6.99	%	U
3.65	%	F
12.61	%	U
6.84	%	U
0	%
20.37	%	F
3.73	%	U

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 if 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.

This question is complete. Move your cursor over or tap on the red arrows to see incorrect answers.

E24-15 (similar to) One subunit of Awesome Sports Company had the following financial results last month: (Click the icon to view the financial results.) Read the requirements. Actual Flexible Flexible Budget Variance (F or U) Awesome - Subunit X Results Budget Direct Materials $ 28,400 $ 26,400 Direct Labor 13,600 14,100 Indirect Labor 26,300 22,800 Utilities 12,600 Depreciation 29,000 4,800 11,500 29,000 5,900 Repairs and Maintenance $ 114,700 $ 109,700 Total Choose from any list or enter any number in the input fields and then click Check Answer. 5 parts remaining Clear All Actual % Variance Flexible Budget Variance (F or U) Results Flexible Budget (F or U) Awesome-Subunit X Direct Materials Direct Labor $ 28,400 $ 26,400 13,600 14,100 Indirect Labor 26,300 22,800 Utilities 12,600 11,500 Depreciation 29,000 4,800 29,000 5,900 Repairs and Maintenance $ 114,700 $ 109,700 Total Print Done 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. 2. Based on the data presented, what type of responsibility center is this subunit? 3. Which items should be investigated if part of management's decision criteria is to investigate all variances exceeding $2,500 or 10%? 4. Should only unfavorable variances be investigated? Explain