Question

Culver Company is a newly formed company specializing in high-speed Internet service for home and business. The owner, Lenny Kirkland, had divided the company into two segments: Home Internet Service and Business Internet Service. Each segment is run by its own supervisor, while basic selling and administrative services are shared by both segments.

Lenny has asked you to help him create a performance reporting system that will allow him to measure each segment’s performance in terms of its profitability. To that end, the following information has been collected on the Home Internet Service segment for the first quarter of 2017.

		Budgeted		Actual
Service revenue		$25,300		$25,300
Allocated portion of:
Building depreciation		10,500		10,500
Advertising		4,800		3,900
Billing		3,800		3,000
Property taxes		1,100		1,200
Material and supplies		1,300		1,400
Supervisory salaries		8,900		9,100
Insurance		4,400		3,200
Wages		2,700		3,100
Gas and oil		2,300		3,200
Equipment depreciation		1,400		1,300

(a)

Prepare a responsibility report for the first quarter of 2017 for the Home Internet Service segment.

CULVER COMPANY Home Internet Services Segment Responsibility Report For the Month Ended March 31, 2017For the Quarter Ended March 31, 2017For the Year Ended March 31, 2017
						Difference
		Budgeted		Actual		Favorable Unfavorable Neither Favorable nor Unfavorable
Controllable MarginContribution MarginControllable Fixed CostsEquipment DepreciationGas and OilInsuranceMaterial and SuppliesService RevenueSupervisory SalariesTotal Controllable Fixed CostsTotal Variable CostsVariable CostsWagesBuilding DepreciationAdvertisingBillingProperty Taxes		$		$		$	UnfavorableNeither Favorable nor UnfavorableFavorable
Contribution MarginEquipment DepreciationGas and OilInsuranceMaterial and SuppliesService RevenueSupervisory SalariesTotal Variable CostsVariable CostsWagesBuilding DepreciationAdvertisingBillingProperty Taxes
Contribution MarginControllable Fixed CostsEquipment DepreciationGas and OilInsuranceMaterial and SuppliesService RevenueSupervisory SalariesTotal Controllable Fixed CostsTotal Variable CostsVariable CostsWagesBuilding DepreciationAdvertisingBillingProperty Taxes							Neither Favorable nor UnfavorableFavorableUnfavorable
Contribution MarginControllable Fixed CostsEquipment DepreciationGas and OilInsuranceMaterial and SuppliesService RevenueSupervisory SalariesTotal Controllable Fixed CostsTotal Variable CostsVariable CostsWagesBuilding DepreciationAdvertisingBillingProperty Taxes							FavorableNeither Favorable nor UnfavorableUnfavorable
Contribution MarginControllable Fixed CostsEquipment DepreciationGas and OilInsuranceMaterial and SuppliesService RevenueSupervisory SalariesTotal Controllable Fixed CostsTotal Variable CostsVariable CostsWagesBuilding DepreciationAdvertisingBillingProperty Taxes							FavorableUnfavorableNeither Favorable nor Unfavorable
Contribution MarginEquipment DepreciationGas and OilInsuranceMaterial and SuppliesService RevenueSupervisory SalariesTotal Variable CostsVariable CostsWagesBuilding DepreciationAdvertisingBillingProperty Taxes							FavorableUnfavorableNeither Favorable nor Unfavorable
Contribution MarginEquipment DepreciationGas and OilInsuranceMaterial and SuppliesService RevenueSupervisory SalariesTotal Variable CostsVariable CostsWagesBuilding DepreciationAdvertisingBillingProperty Taxes							UnfavorableFavorableNeither Favorable nor Unfavorable
Controllable MarginControllable Fixed CostsEquipment DepreciationGas and OilInsuranceMaterial and SuppliesService RevenueSupervisory SalariesTotal Controllable Fixed CostsWagesBuilding DepreciationAdvertisingBillingProperty Taxes
Controllable MarginControllable Fixed CostsEquipment DepreciationGas and OilInsuranceMaterial and SuppliesService RevenueSupervisory SalariesTotal Controllable Fixed CostsTotal Variable CostsVariable CostsWagesBuilding DepreciationAdvertisingBillingProperty Taxes							UnfavorableFavorableNeither Favorable nor Unfavorable
Controllable MarginControllable Fixed CostsEquipment DepreciationGas and OilInsuranceMaterial and SuppliesService RevenueSupervisory SalariesTotal Controllable Fixed CostsTotal Variable CostsVariable CostsWagesBuilding DepreciationAdvertisingBillingProperty Taxes							UnfavorableNeither Favorable nor UnfavorableFavorable
Controllable MarginControllable Fixed CostsEquipment DepreciationGas and OilInsuranceMaterial and SuppliesService RevenueSupervisory SalariesTotal Controllable Fixed CostsTotal Variable CostsVariable CostsWagesBuilding DepreciationAdvertisingBillingProperty Taxes							FavorableUnfavorableNeither Favorable nor Unfavorable
Controllable MarginControllable Fixed CostsEquipment DepreciationGas and OilInsuranceMaterial and SuppliesService RevenueSupervisory SalariesTotal Controllable Fixed CostsWagesBuilding DepreciationAdvertisingBillingProperty Taxes							FavorableUnfavorableNeither Favorable nor Unfavorable
Controllable MarginControllable Fixed CostsEquipment DepreciationGas and OilInsuranceMaterial and SuppliesService RevenueSupervisory SalariesTotal Controllable Fixed CostsWagesBuilding DepreciationAdvertisingBillingProperty Taxes		$		$		$	UnfavorableNeither Favorable nor UnfavorableFavorable

Answer 1

CULVER COMPANY
Home Internet Services Segment
Responsibility Report
For the Quarter Ended March 31, 2017
	Budget	Actual	Difference Favorable F Unfavorable U
Service Revenue	$ 25,300.00	$ 25,300.00	$                         -	Neither Favorable nor Unfavorable
Variable costs:
Material and supplies	$   1,300.00	$   1,400.00	$                 100.00	Unfavorable
Wages	$   2,700.00	$   3,100.00	$                 400.00	Unfavorable
Gas and oil	$   2,300.00	$   3,200.00	$                 900.00	Unfavorable
Total variable costs	$   6,300.00	$   7,700.00	$              1,400.00	Unfavorable
Contribution margin	$ 19,000.00	$ 17,600.00	$              1,400.00	Unfavorable
Controllable fixed costs:
Supervisory salaries	$   8,900.00	$   9,100.00	$                 200.00	Unfavorable
Insurance	$   4,400.00	$   3,200.00	$              1,200.00	Favorable
Equipment depreciation	$   1,400.00	$   1,300.00	$                 100.00	Favorable
Total controllable fixed costs	$ 14,700.00	$ 13,600.00	$              1,100.00	Favorable
Controllable margin	$   4,300.00	$   4,000.00	$                 300.00	Unfavorable