Explain the Computation Occurring in the Accompanying Figure

question 11

Essay

Explain the computation occurring in the accompanying figure.

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Definitions:

Responsibility Accounting

A system of accountability in which managers are held responsible for those items of revenue and cost—and only those items—over which they can exert significant control. The managers are held responsible for differences between budgeted and actual results.

Significant Variances

Discrepancies between planned and actual figures that are large enough to warrant attention and possibly corrective action by management.

Cost Control

A process of managing and monitoring expenses to keep business operations within a budget.

Responsibility Accounting

A system of accounting which holds individuals or departments accountable for costs and expenses under their control.