Concept explainers
Concept Introduction
Responsibility Center: It is a subunit of a company, headed by a manager who holds responsibility towards its activities and results.
Flexible Budget: It is a type of budget that changes based on the volume of business activity.
Static Budget: It is a type of budget that does not change as the volume of business activity changes.
Flexible
Sales Volume Variance: It refers to the change in revenue, or profit (in case of absorption costing), or contribution (in case of marginal costing) caused by the difference between the actual and budgeted sales units. For a revenue center, sales volume variance is the difference between the actual and expected number of units sold, multiplied by the budgeted price per unit; it is also the difference between the flexible budget and static budget.
1.
To Complete: The responsibility report for the given subunit.
2.
The type of responsibility center this subunit is.
3.
The items that should be investigated if part of management’s decision criteria is to investigate all variances exceeding $10,000.
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