The Broaddus Company Has Requested a Performance Report That Reports

question 29

Essay

The Broaddus Company has requested a performance report that reports both sales activity variances and flexible budget variances.The following table of information is provided: $\begin{array}{c}\begin{array}{|l|}\hline \text { Column(1) } \\\hline \\\hline \\\hline \text { Number of units } \\\hline \\\hline \text { Seles } \\\hline \text { Less variable costs: } \\\hline \text { Materials } \\\hline \text { Labor } \\\hline \text { Overhead } \\\hline \text { Selling \& admin. } \\\hline \text { Contribution margin } \\\hline \text { Less fixed costs: } \\\hline \text { Manufacturing } \\\hline \text { Selling \& admin } \\\hline \text { Net income } \\\hline \end{array}\begin{array}{c|}\hline \text { (2) } \\\hline \text { Static } \\\hline \text { Budget } \\\hline 8,600 \\\hline\\\hline \$ 430,000 \\\hline\\\hline 103,200 \\\hline 77,400\\\hline 43,000 \\\hline 17,200 \\\hline \$ 189,200 \\\hline \\ \hline 18,000 \\\hline 37,0010 \\\hline \$ 134,200 \\\hline\end{array}\begin{array}{c|}\hline \text { (3) } \\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\end{array}\begin{array}{c|}\hline \text { (4) } \\\hline\text { F}/\\\hline\text {U}\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\end{array}\begin{array}{c|}\hline \text { (5) } \\\hline \text { Flexible } \\\hline \text { Budget } \\\hline9,000 \\\hline\\\hline \$ 450,000 \\\hline\\\hline 108,000 \\\hline81,000 \\\hline 45,000 \\\hline 18,000 \\\hline \$ 198,000 \\\hline \\ \hline 18,000 \\\hline 37,000 \\\hline \$ 143,000 \\\hline\end{array}\begin{array}{c|}\hline \text { (6) } \\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline \end{array}\begin{array}{c|}\hline \text { (7) } \\\hline\text { F}/\\\hline\text {U}\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\end{array}\begin{array}{l|}\hline \text { (8) }\\\hline \text { Actual } \\\hline \text { Results } \\\hline 9,000 \\\hline\\\hline \$ 460,000 \\\hline\\\hline 113,000 \\\hline 88,000 \\\hline 44,000 \\\hline 20,000 \\\hline \$ 195,000 \\\hline\\\hline 16,000 \\\hline 38,000 \\\hline \$ 141,000 \\\hline\end{array}\end{array}$
Required:
1)Compute and enter variances in columns 3 and 6.In column 3,enter the variance (difference)between column 2 and column 5;in column 4,label the variance as favorable (F)or unfavorable (U).In column 6,enter the variance between columns 5 and 8,and in column 7 indicate whether this variance is favorable or unfavorable.
2)Which column contains sales volume variances,and which column contains flexible budget variances?
3)Comment on this company's performance.

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Definitions:

Preset Level

A predetermined or established level or standard that needs to be achieved or which serves as a benchmark for performance or operation.

Implicit Favorite

An unspoken preference or bias towards a particular option or choice in decision-making processes.

Escalation of Commitment

A psychological process whereby an individual continues to support a failing course of action due to cognitive biases, loss aversion, and sunk costs.

Decision-making Skills

The ability to evaluate information, consider alternatives, and choose the most appropriate course of action.