Question

Requirement 1. Complete the performance evaluation report for the subunit. (Enter a variance for each account, and select whether the variance is unfav numbers. Enter the variance percentages rounded to three decimal places, X.XXX%.) 

Answer 1

Here we need to compare the actual figures with the budgeted figures in order to determine whether there is any changes or not, i.e variance.

A change in variance becomes favourable when any actual income/profit item is more than budgeted or any expense item is less than budgeted.

A change in variance becomes unfavourable when any actual income item or profit is less than budgeted or any expense is more than budgeted.

Percentage Variance= Flexible budget Variance/ Flexible Budget *100

Lets calculate the figures for the above question.

Extreme sports	Actual	Flexible Budget	Flexible budget variance	Uor F	Percentage Variance	U or F
Sales	5,45,500	5,00,000	45,500	F	9.10	F
Cost of Goods Sold	3,87,000	3,75,000	12,000	U	3.20	U
Gross Margin	1,58,500	1,25,000	33,500	F	26.80	F
Operating Expense	10,380	10,000	380	U	3.80	U
Operating Income Before Service Dept Charges	1,48,120	1,15,000	33,120	F	28.80	F
Service Dept Charges	52,000	40,000	12,000	U	30.00	U
Operating Income	96,120	75,000	21,120	F	28.16	F