The Dinkle and Frizell Dental Clinic performs both preventive and orthodontic dental services. The two owners, Reese Dinkle and Anita Frizell, operate the clinic as two separate investment centers: Preventive Services and Orthodontic Services. Each of them is in charge of one of the centers: Reese for Preventive Services and Anita for Orthodontic Services. Each month, they prepare an income statement for the two centers to evaluate performance and make decisions about how to improve the operational efficiency and profitability of the clinic. Recently, they have been concerned about the profitability of the Preventive Services operations. For several months, it has been reporting a loss. The responsibility report for the month of May 2014 is shown below.

In addition, the owners know that the investment in operating assets at the beginning of the month was $82,400, and it was $77,600 at the end of the month. They have asked for your assistance in evaluating their current performance reporting system.

Instructions
(a) Prepare a responsibility report for an investment center as illustrated in the chapter.
(b) Write a memo to the owners discussing the deficiencies of their current reportingsystem.

Transcribed Image Text:

Difference rom Budget $1,000 F Actual $ 40,000 Service revenuc Variable costs Filling materials Novocain Supplies Dental assistant wages Utilities 5,000 3,900 1,900 2,500 500 13,800 100 U 100 U 350 F 110 U 40 F Total variable costs Fixed costs llocated portion of receptionist's sala Dentist salary Equipment depreciation Allocated portion of building 3,000 9,800 6,000 200 U 400 U depreciation 15,000 33,800 (7,600) 1,000 U 1,600 U 560 U Total fixed costs Operating income (loss)