Lorlily Company is an agricultural supply firm. The management of the company is decentralized, with division managers heading the two operating divisions: Machinery and Seed/Fertilizer. Within each division, the sales are split between the two states of Indiana and Illinois.

The following data are applicable to revenue in 2000 :

\begin{tabular}{|c|c|c|}

\hline & Budget & Actual \\

\hline Machinery-Indiana. . . . . . . . . . . . . . . . . . . . . & $\$ 800,000$ & $\$ 750,000 \quad$ \\

\hline Seed/Fertilizer-Illinois. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . & 500,000 & 580,000 \\

\hline Seed/Fertilizer-Indiana . . . . . . . . . . . . . . . . . . & 400,000 & 530,000 \\

\hline Machinery-lllinois & 350,000 & 250,000 \\

\hline

\end{tabular}

1. Prepare a responsibility accounting report for the head of the Machinery division. For each of the two geographic areas (Indiana and Illinois), show whether the variance between budgeted and actual machinery revenue is favorable or unfavorable.

2. Prepare a responsibility accounting report for the head of the entire company. The company head wants to see only the overall results for each of the two operating divisions (Machinery and Seed/Fertilizer); a detailed breakdown by geographic area is not requested.