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17 April, 10:44

The Real Estate Products Division of McKenzie Co. is operated as a profit center. Sales for the division were budgeted for 2019 at $1,250,000. The only variable costs budgeted for the division were cost of goods sold ($610,000) and selling and administrative ($80,000). Fixed costs were budgeted at $130,000 for the cost of goods sold, $120,000 for selling and administrative, and $95,000 for noncontrollable fixed costs.

Actual results for these items were:

Sales $1,175,000

Cost of goods sold Variable 545,000

Fixed 140,000

Selling and administrative Variable 82,000

Fixed 100,000

Noncontrollable fixed 105,000

Prepare a responsibility report for the Real Estate Products Division for 2019.

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  1. 17 April, 14:16
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    Answer and Explanation:

    The Preparation of responsibility report for the Real Estate Products Division is following below:-

    Particulars Budgeted Actual Difference Favorable/

    Unfavorable

    Sales $1,250,000 $1,175,000 $75,000 Unfavorable

    (Sales of Budgeted - Actual)

    Variable cost ($610,000) $545,000 $65,000 Favorable

    (variable cost of Budgeted - Actual)

    Selling and

    administration ($80,000) $82,000 $2,000 Unfavorable

    (selling and admin. of Budgeted - Actual)

    Total variable

    cost $690,000 $627,000 $63,000 Favorable

    Contribution

    margin $560,000 $548,000 $12,000 Unfavorable

    (Sales - Total variable cost)

    Fixed cost

    Cost of goods

    sold $130,000 $140,000 $10,000 Unfavorable

    Selling and

    administration $120,000 $100,000 $20,000 Favorable

    Total fixed cost $250,000 $240,000 $10,000 Favorable

    (Fixed cost of goods sold + Selling and administration and the difference of these two)

    Net operating

    income $310,000 $308,000 $2,000 Unfavorable

    Therefore to reach the net operating income we will simply deduct the Contribution margin and total fixed cost.
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