Question

Torres Company accumulates the following summary data for the year ending December 31, 2020, for its Water Division, which it operates as a profit center: sales—$2,076,800 budget, $2,240,000 actual; variable costs—$1,002,000 budget, $1,054,100 actual; and controllable fixed costs—$298,600 budget, $303,800 actual.

Prepare a responsibility report for the Water Division for the year ending December 31, 2020.

Answer 1

Answer and Explanation:

The Preparation of responsibility report is shown below:-

Responsibility report

Torres Company

For the year ended December 31, 2020

Particulars Budgeted Actual Difference

Sales a $2,076,800 $2,240,000 $163,200 Favorable

Variable costs b $1,002,000 $1,054,100 $52,100 Unfavorable

Contribution

margin $1,074,800 $1,185,900 $111,100 Favorable

c = a - b

Controllable

fixed costs d $298,600 $303,800 $5,200 Unfavorable

Controllable

margin $776,200 $882,100 $105,900 Favorable

e = c - d

Therefore if budgeted is higher than actual then it will become Favorable and if actual is higher than budgeted than it will become Unfavorable.