Question

Prepare a responsibility report for a profit centre. P11.53B (LO 3) Henning Manufacturing Ltd. operates its patio furniture division as a profit centre. Operating data for this division for the year ended December 31, 2022, are as follows: Sales Costs of goods sold Variable costs Controllable fixed costs Selling and administrative expenses Variable costs Controllable fixed costs Noncontrollable fixed costs Budget $2,500,000 1,300,000 200,000 220,000 50,000 70,000 Difference from Budget $60,000 F 41,000 F 6,000 U 7,000 U 2,000 U 4,000 U In addition, Henning Manufacturing incurred $180,000 of indirect fixed costs that were budgeted at $175,000. It allocates 20% of these costs to the patio furniture division. The division manager cannot control any of these costs. Instructions a. Prepare a responsibility report for the patio furniture division for the year. a. Controllable margin: $86,000 F b. Comment on the manager's performance in controlling revenues and costs. c. Identify any costs that have been excluded from the responsibility report and explain why they were excluded.

Answer 1

To prepare a responsibility report for a profit center, you need to include the controllable margin, comment on the manager's performance, and identify any excluded costs.

Step-by-step explanation:

To prepare a responsibility report for a profit center, you need to include the controllable margin, comment on the manager's performance, and identify any excluded costs.

a. The controllable margin is calculated by subtracting controllable fixed costs from sales, and adding or subtracting the difference from budget. In this case, the controllable margin is $86,000 favorable (F).

b. The manager's performance in controlling revenues and costs can be evaluated by analyzing the difference from budget for each category. In this case, the manager performed well as there were favorable variances in sales and controllable costs.

c. The costs that have been excluded from the responsibility report are the noncontrollable fixed costs and the indirect fixed costs allocated to the division. These costs cannot be controlled by the division manager and are therefore not included in the report.