Chapter 10Richard E. McDermott, Ph.D..ppt

Exercise 10-8 Terry should not have been reprimanded. As shown in the flexible budget report, variable costs were $1,250 below budget. Exercise 10-9 XYZ Plumbing company is a newly formed company specializing in plumbing service for home and business. The owner has divided the company into two segments: home plumbing services and business plumbing services. Each segment is run by its own supervisor, all basic selling and administrative services are shared by both segments. The president has asked you to help him create a performance reporting system that will allow them to measure each segments performance in terms of its profitability. To that end following information has been collected on the home services segment for the first quarter of 2008. Exercise 10-9 Budgeted Actual Service revenue 25,000 26,000 Allocated portion of: Building depreciation 11,000 11,000 Advertising 5000 4200 Billing 3500 3000 Property taxes 1200 1000 Material and supplies 1500 1200 Supervisory salaries 9000 9400 Insurance 4000 3500 Wages 3000 3300 Gas and oil 2700 3400 Equipment depreciation 1600 1300 Exercise 10-9 Prepare a responsibility report for the first quarter of 2008 for the home plumbing service segment. Remember the formula: Revenue – variable expenses – controllable fixed expenses = controllable margin Budget Actual DifferenceFavorable FUnfavorable U Service revenue $25,000 $26,000 $1,000 F Variable costs: Material and supplies 1,500 1,200 300 F Wages 3,000 3,300 300 U Gas and oil 2,700 3,400 700 U Total variable costs 7,200 7,900 700 U Contribution margin 17,800 18,100 300 F Responsibility ReportFor the Quarter Ended March 31, 2008 Calculate the contribution margin first: Budget Actual DifferenceFavorable FUnfavorable U Service revenue $25,000 $26,000 $1,000 F Variable costs: Material and supplies 1,500 1,200 300 F Wages 3,000 3,300 300 U Gas and oil 2,700 3,400 700 U Total variable costs 7,200 7,900 700 U C