Chapter 23, Problem 1DQ

To determine

Explain the contents of a performance report for each type of responsibility center.  Explain the reasons on hoe reports enhance the understandability and comparability of data that are presented.

Explanation of Solution

• In general, all the performance reports contain both financial and non-financial measures in order to understand and compare the performances.
• Cost center reports explains the controllable product cost and make comparison among the following actual costs such as direct material, direct labor, and the overheads and the corresponding amounts in the flexible and master budgets and thus, computes the differences.  
• Variance analysis of the differences will be presented. A discretionary cost center report makes comparison of center’s actual and budgeted controllable costs. These calculate variances among the numbers.
• A revenue cost center reports make comparison between actual and budgeted revenues by type, source and the notes of the variance.
• A profit cost center report makes comparison about the following: Controllable revenues, costs, and resulting profits of a center and provide reports for any variations made.
• Next, investment center report provides summarized report of all the centers that has investment center control and reports the investments in asset.
• Thus, a comparison is made between the costs and all variances are reported. These reports help in making comparison and thus understanding of the report in enhanced.