Greene Enterprises prepares monthly departmental reports in an effort to control its operating costs. Each department has a manager to whom the report is addressed and who is held responsible for the operating results in his or her department. The report made to Department D for October follows:
Sales $56,000 $63,000
Costs of goods sold 39,200 37,800
Gross margin 16,800 25,200
Direct operating expenses* 16,720 18,000
Contribution to indirect expense $80 $7,200
*of which $10,000 are costs not varying directly with sales volume at the expected level of sales.
Prepare a report that will be of more value in analyzing and appraising the performance of the manager of Department D for October. Comment on the operating results.
Budgeted Actual Variation
Sales $56,000 $63,000 $7,000
Costs of goods sold 39200 37800 ($1,400)
Gross margin 16,800 25,200 $8,400
Less other variable expenses 6,720 8,000 $1,280
Contribution Margin 10,080 17,200 $7,120
Less Fixed Direct ...
This solution prepares a report to judge performance of a manager of a particular department