Jordan Company uses budgets in controlling costs. The May 2012 budget report for the company’s Packaging Department is as follows.
|
Difference |
||
|
Budget |
from Budget |
|
|
Sales |
$2,400,000 |
$100,000 U |
|
Cost of goods sold |
||
|
Variable |
1,200,000 |
60,000 U |
|
Controllable fixed |
200,000 |
8,000 F |
|
Selling and administrative |
||
|
Variable |
240,000 |
8,000 F |
|
Controllable fixed |
60,000 |
4,000 U |
|
Noncontrollable fixed costs |
50,000 |
2,000 U |
In addition, Collins Manufacturing incurs $150,000 of indirect fixed costs that were budgeted at$155,000. Twenty percent (20%) of these costs are allocated to the Home Appliance Division. None of these costs are controllable by the division manager.
Instructions
(a) Prepare a responsibility report for the Home Appliance Division (a profit center) for the year.
(b) Comment on the manager’s performance in controlling revenues and costs.
(c) Identify any costs excluded from the responsibility report and explain why they were excluded.