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28 October, 18:06

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.

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  1. 28 October, 18:12
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    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.
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