One subunit of Bacall Sports Manufacturing Company had the following financial results last month: ABCDE1Bacall Sports Manufacturing Company—Water Sports Subunit2Monthly Performance Report3For the Month4 ActualBudgetedVariance *Variance Percentage *5Direct materials$16,095$15,000 6Direct labor15,24016,000 7Indirect labor29,20025,000 8Utilities16,39515,000 9Depreciation24,00024,000 10Repairs and maintenance6,2857,500 11Total$107,215$102,500 *Be sure to indicate whether each variance is favorable (F) or unfavorable (U). Requirements:1.Complete the performance evaluation report for this subunit.2.Based on the data presented, what type of responsibility center is the subunit?3.Which items should be investigated if part of the management's decision criteria is to investigate all variances exceeding $2,500 or 12.5%?4.Should only unfavorable variances be investigated? Explain.

Variance is the Difference between actual and budgeted values. If the actual expense is greater than…

Answered: One subunit of Bacall Sports…

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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One subunit of Bacall Sports Manufacturing Company had the following financial results last month:

	A	B	C	D	E
1	Bacall Sports Manufacturing Company—Water Sports Subunit
2	Monthly Performance Report
3	For the Month
4		Actual	Budgeted	Variance *	Variance Percentage *
5	Direct materials	$16,095	$15,000
6	Direct labor	15,240	16,000
7	Indirect labor	29,200	25,000
8	Utilities	16,395	15,000
9	Depreciation	24,000	24,000
10	Repairs and maintenance	6,285	7,500
11	Total	$107,215	$102,500

*Be sure to indicate whether each variance is favorable (F) or unfavorable (U).

Requirements:

1.	Complete the performance evaluation report for this subunit.
2.	Based on the data presented, what type of responsibility center is the subunit?
3.	Which items should be investigated if part of the management's decision criteria is to investigate all variances exceeding $2,500 or 12.5%?
4.	Should only unfavorable variances be investigated? Explain.

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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