Question

16. One subunit of Zoom Sports Company had the following financial results last month (Click the icon to view the financial results.) Read the requirements 18 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%".) Zoom Sports Company-Team Sports Subunit Monthly Performance Report For the Month Variance Product Actual Budgeted Variance Percentage Sales $ 709.800 S 650,000 (1) % (8) Less: Variable expenses 419.250 406,250 Contribution margin $ 290550 S 243,750 (3) % (10) Less: Direct fixed expenses 13,050 12,500 (4) % (11) Segment margin $ 277,500 S 231,250 (5) % (12) Less: Common fixed expenses 44,250 31,250 $ 233.250 S 200,000 Operating income (7) % (14) Requirement 2. Based on the data presented, what type of responsibility center is this subunit? This performance report includes (15) therefore this subunit must be (16) Requirement 3. Which items should be investigated if part of management's decision criteria is to investigate all variances equal to or exceeding $13,000 and exceeding 12% (both criteria must be met)? (If a box is not used in the table, leave the box empty: do not select a label.) (17) (18) (19) (20) Requirement 4. Should only unfavorable variances be investigated? Explain. Managers should investigate (21) - Favorable variances (22) - Management needs to evaluate (23) 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 (24) due to sales volume differences between budget and actual. Differences in sales volume are captured by the (25) The flexible budget variance is due to (26) - Requirement 6. Do you think management will place equal weight on each of the $13,000 variances? Explain Management will (27) Additionally, they may not place much weight on (28) – because (29) -

Answer 1

1	Performance evaluation report
		Actual Results	Flexible Budget	Flexible Budget Variance	% Variance
	Sales	$ 709,800	$ 650,000	$ 59,800	9.20%	F
	Variable expense	$ 419,250	$ 406,250	$ 13,000	3.20%	U
	Contribution margin	$ 290,550	$ 243,750	$ 46,800	19.20%	F
	Direct fixed cost	$   13,050	$   12,500	$       550	4.40%	U
	Segment Margin	$ 277,500	$ 231,250	$ 46,250	20.00%	F
	Common fixed cost	$   44,250	$   31,250	$ 13,000	41.60%	U
	Operating Income	$ 175,000	$ 174,000	$    1,000	0.57%	F
2	This performance report includes both revenue and cost data, therefore, this subunit must be a profit center
3	Investigate
	Sales
	Variable expense
	Common fixed cost
4	Managers should investigate favorable as well as unfavorable variances.