One subunit of Speed Sports Manufacturing Company had the following financial results last month: Data table: ABCDE1Speed Sports Manufacturing Company—Camping and Hiking Subunit2Monthly Performance Report3For the Month4 ActualBudgetedVariance *Variance Percentage *5Direct materials$16,140$15,000 6Direct labor19,02020,000 7Indirect labor29,30025,000 8Utilities13,11012,000 9Depreciation19,00019,000 10Repairs and maintenance3,3704,000 11Total$99,940$95,000 *Be sure to indicate whether each variance is favorable (F) or unfavorable (U). Requirements: 1.Complete the performance evaluation report for this subunit.2.Based on the data presented, what type of responsibility center is the subunit?3.Which items should be investigated if part of the management's decision criteria is to investigate all variances exceeding $3,400 or 12%?4.Should only unfavorable variances be investigated? Explain.

Solving the first three parts. Variance analysis can be summarized as an analysis of the difference…

Answered: One subunit of Speed Sports…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter22: Budgeting

Section: Chapter Questions

Problem 8E: Professional labor cost budget for a service company Based on the data in Exercise 7 and assuming...

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Question

One subunit of Speed Sports Manufacturing Company had the following financial results last month:

Data table:

	A	B	C	D	E
1	Speed Sports Manufacturing Company—Camping and Hiking Subunit
2	Monthly Performance Report
3	For the Month
4		Actual	Budgeted	Variance *	Variance Percentage *
5	Direct materials	$16,140	$15,000
6	Direct labor	19,020	20,000
7	Indirect labor	29,300	25,000
8	Utilities	13,110	12,000
9	Depreciation	19,000	19,000
10	Repairs and maintenance	3,370	4,000
11	Total	$99,940	$95,000

*Be sure to indicate whether each variance is favorable (F) or unfavorable (U).

Requirements:

1.	Complete the performance evaluation report for this subunit.
2.	Based on the data presented, what type of responsibility center is the subunit?
3.	Which items should be investigated if part of the management's decision criteria is to investigate all variances exceeding $3,400 or 12%?
4.	Should only unfavorable variances be investigated? Explain.

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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