One subunit of Speed Sports Manufacturing Company had the following financial results last month:ABCDE1Speed Sports Manufacturing Company—Camping and Hiking Subunit2Monthly Performance Report3For the Month4 ActualBudgetedVariance *Variance Percentage *5Direct materials$16,140$15,000 6Direct labor19,02020,000 7Indirect labor29,30025,000 8Utilities13,11012,000 9Depreciation19,00019,000 10Repairs and maintenance3,3704,000 11Total$99,940$95,000 *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 $3,400 or 12%?4.Should only unfavorable variances be investigated? Explain.

Variances can occur in anything you forecast, but they are common in budgeting. By changing the baseline that a variance is calculated from, its magnitude can be varied. Variance analysis is a crucial tool for decision-making because it helps companies pinpoint their strong points and areas for improvement.An organization's employees' tasks are monitored through the use of a performance evaluation report. As a result, when creating these reports, extra care must be taken. Above all, it is written in a way that promotes positivity among the staff members of the company. It is useful to have a productivity guide for your staff to help with this.All professional parameters must be measured by the performance review instrument. Furthermore, the organization needs to use this data for employee training, conflict resolution, or productivity optimization.1. Preparation of performance evaluation report: ProductActual results Flexible BudgetVarianceFlexible Budget Variance ABC=A-BD=C/BDirect Materials16,14015,0001,140U7.60%Direct Labor19,02020,000-980F-4.90%Indirect Labor29,30025,0004,300U17.20%Utilities13,11012,0001,110U9.25%Depreciation19,00019,0000No Variance0.00%Repairs and Maintenance3,3704,000-630F-15.75%Total99,94095,0004,940U5.20%2. The subunit is a cost center.3. The indirect labor and repair and maintenance items must be investigated if part of the management's decision criteria is to investigate all variances.4. No, further research is necessary to ensure that they won't have a negative long-term impact on the company.

Answered: One subunit of Speed 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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Question

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

A	B	C	D	E
1	Speed Sports Manufacturing Company—Camping and Hiking Subunit
2	Monthly Performance Report
3	For the Month
4		Actual	Budgeted	Variance *	Variance Percentage *
5	Direct materials	$16,140	$15,000
6	Direct labor	19,020	20,000
7	Indirect labor	29,300	25,000
8	Utilities	13,110	12,000
9	Depreciation	19,000	19,000
10	Repairs and maintenance	3,370	4,000
11	Total	$99,940	$95,000

*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 $3,400 or 12%?
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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