Family Resorts, Inc., is a holding company for several vacation hotels in the northeastern and mid- Atlantic states. The firm originally purchased several old inns, restored the buildings, and upgraded the recreational facilities. Vacationing families have been well pleased with the inns because many services are provided that accommodate children and afford parents time for themselves. Since the completion of the restoration 10 years ago, the company has been profitable. Family Resorts has just concluded its annual meeting of regional and district managers. This meeting is held each November to review the results of the previous season and to help the managers prepare for the upcoming year. Before the meeting, the managers submitted proposed budgets for their districts or regions, as appropriate. These budgets are reviewed and consolidated into an annual operating budget for the entire company. The 2015 budget has been presented at the meeting, and the managers accepted it. To evaluate the performance of its managers, Family Resorts uses responsibility accounting. Therefore, the preparation of the budget is given close attention at headquarters. If major changes need to be made to the budgets that the managers submitted, all affected parties are consulted before the changes are incorporated. The two figures designated Problem 15 present two reports from the budget booklet that all managers received at the meeting. Required The regional and district managers accepted Family Resort’s budget. Based on the facts presented, evaluate the budget process Family Resorts employs by addressing the following: 1. What features of the budget presentation shown are likely to make the budget attractive to managers? 2. What recommendations, if any, could be made to the budget preparers to improve the budget process? Explain your answer.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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CMA-ADAPTED RESPONSIBILITY
ACCOUNTING
Family Resorts, Inc., is a holding company for several
vacation hotels in the northeastern and mid-
Atlantic states. The firm originally purchased several
old inns, restored the buildings, and upgraded the
recreational facilities. Vacationing families have
been well pleased with the inns because many services
are provided that accommodate children and
afford parents time for themselves. Since the completion
of the restoration 10 years ago, the company has
been profitable.
Family Resorts has just concluded its annual
meeting of regional and district managers. This
meeting is held each November to review the results
of the previous season and to help the managers prepare
for the upcoming year. Before the meeting, the
managers submitted proposed budgets for their districts
or regions, as appropriate. These budgets are
reviewed and consolidated into an annual operating
budget for the entire company. The 2015 budget has
been presented at the meeting, and the managers
accepted it.
To evaluate the performance of its managers, Family
Resorts uses responsibility accounting. Therefore,
the preparation of the budget is given close attention
at headquarters. If major changes need to be made to
the budgets that the managers submitted, all affected
parties are consulted before the changes are incorporated.
The two figures designated Problem 15 present
two reports from the budget booklet that all managers
received at the meeting.
Required

The regional and district managers accepted
Family Resort’s budget. Based on the facts presented,
evaluate the budget process Family
Resorts employs by addressing the following:
1. What features of the budget presentation
shown are likely to make the budget attractive
to managers?
2. What recommendations, if any, could be
made to the budget preparers to improve the
budget process? Explain your answer.

## Problem 15: Responsibility Accounting

### Family Resorts, Inc. Responsibility Summary
**($000 omitted)**

#### Reporting Unit: Family Resorts
**Responsible Person:** President
- **Mid-Atlantic Region:** $605
- **New England Region:** $365
- **Unallocated costs:** ($160)

**Income before taxes:** $810

#### Reporting Unit: New England Region
**Responsible Person:** Regional Manager
- **Vermont:** $200
- **New Hampshire:** $140
- **Maine:** $105
- **Unallocated costs:** ($80)

**Total contribution:** $365

#### Reporting Unit: Maine District
**Responsible Person:** District Manager
- **Harbor Inn:** $80
- **Camden Country Inn:** $60
- **Unallocated costs:** ($35)

**Total contribution:** $105

#### Reporting Unit: Harbor Inn
**Responsible Person:** Innkeeper
- **Revenue:** $600
- **Controllable costs:** ($455)
- **Allocated costs:** ($65)

**Total contribution:** $80

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