Katsu, Inc $\quad$ $\quad$ $\quad$ $\quad$ $\quad$

question 5

Multiple Choice

Katsu, Inc. has a small car division that operates as a profit center. Below is a partially completed responsibility report for the first quarter. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Responsibility Report }$
$$\begin{array} { |c | c | c | c | c | c | c| } \hline & \text { Actual } & \begin{array} { c } \text { Flexible } \\\text { Budget }\end{array} & \begin{array} { c } \text { Flexible } \\\text { Budget } \\\text { Variance }\end{array} & \text { U/F } & \begin{array} { c } \text { Percentage } \\\text { Variance }\end{array} & \text { U/F } \\\hline \begin{array} { c } \text { Sales } \\\text { Revenue }\end{array} & \$ 688,000 & \$ 700,000 & & & & \\\hline \begin{array} { c } \text { Variable } \\\text { Expenses }\end{array} & \underline { 309,000 } & \underline { 322,000 } & & & & \\\hline \begin{array} { c } \text { Contribution } \\\text { Margin }\end{array} & 379,000 & 378,000 & & & & \\\hline \begin{array} { c } \text { Traceable } \\\text { Fixed } \\\text { Expenses }\end{array} & \underline { 372,000 } & \underline { 369,000 } & & & & \\\hline \begin{array} { c } \text { Division } \\\text { Margin }\end{array} & \$ 7000 & \$ 9000 & & & & \\\hline\end{array}$$ Compute the percentage variance for the flexible budget variance for sales revenue. (Round your answer to two decimal places.)

• A) 1.71% F
• B) 1.71% U
• C) 4.04% U
• D) 4.04% F

---

Definitions:

Bad Debts Expense

The portion of receivables that a company anticipates will not be collected and is thus written off as an expense in the financial statements.

Operating Expense

Incurred expenses that are related to a company's main operational activities, excluding cost of goods sold and capital expenditures.

Statement of Income

A financial statement that reports a company's financial performance over a specific period, showing income, expenses, and net profit or loss.

Allowance for Doubtful Accounts

An estimation of the accounts receivable that may not be collected due to customer defaults.