Clarke Inc. operates the Patio Furniture Division as a profit center. Operating

Question

Clarke Inc. operates the Patio Furniture Division as a profit center. Operating data for this division for the year ended December 31, 2017, are as shown below.

Budget

Difference
from Budget

Favorable

Favorable

Unfavorable

Unfavorable

Unfavorable

Unfavorable

In addition, Clarke incurs $184,000 of indirect fixed costs that were budgeted at $174,500. Twenty percent (20%) of these costs are allocated to the Patio Furniture Division.

Prepare a responsibility report for the Patio Furniture Division for the year. (List variable costs before fixed costs.)

CLARKE INC.
Patio Furniture Division
Responsibility Report
For the Year Ended December 31, 2017

Difference

Budget

Actual

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

Budget

Difference
from Budget

Sales $2,499,100 $49,700

Favorable

Cost of goods sold        Variable 1,303,600 41,600

Favorable

       Controllable fixed 199,700 3,600

Unfavorable

Selling and administrative        Variable 213,200 6,300

Unfavorable

       Controllable fixed 46,500 2,000

Unfavorable

Noncontrollable fixed costs 72,400 4,700

Unfavorable

Explanation / Answer

CLARKE INC. Patio Furniture Division Responsibility Report For the Year Ended December 31, 2017 Difference Budget Actual from Budget Sales 2499100 2548800 49700 Favorable        Variable Cost of goods sold 1303600 1262000 41600 Favorable Selling and administrative 213200 219500 6300 Unfavorable Total variable cost 1516800 1481500 35300 Favorable Contributio margin 982300 1067300 85000 Favorable        Controllable fixed cost Cost of goods sold 199700 203300 3600 Unfavorable Selling and administrative 46500 48500 2000 Unfavorable      Total  Controllable fixed cost 246200 251800 5600 Unfavorable Controllable amrgin 736100 815500 79400 Favorable

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