E$25\mathrm{.}18($LO $4)$ Service Writing The Dinkle and Frizell Dental Clinic provides both preventive and

orthodontic dental services. The two owners, Reese Dinkle and Anita Frizell, operate the clinic as two

separate investment centers: Preventive Services and Orthodontic Services. Each of them is in charge of

one of the centers: Reese for Preventive Services and Anita for Orthodontic Services. Each month, they

prepare an income statement for the two centers to evaluate performance and make decisions about how

to improve the operational e$$ ciency and profi tability of the clinic.

Recently, they have been concerned about the profi tability of the Preventive Services operations.

For several months, it has been reporting a loss. The responsibility report for the month of May $2020$ is

shown below.

Prepare a responsibility report for an

investment center.

Actual

Di$$ erence

from

Budget

Service revenue $$40,000$ $$1,000$ F

Variable costs

Filling materials $5,000100$ U

Novocain $3,900100$ U

Supplies $1,900350$ F

Dental assistant wages $2,5000$

Utilities $500110$ U

Total variable costs $13,80040$ F

Fixed costs

Allocated portion of receptionist$$s

salary $3,000200$ U

Dentist salary $9,800400$ U

Equipment depreciation $6,0000$

Allocated portion of building depreciation $15,0001,000$ U

Total fixed costs $33,8001,600$ U

Operating income $($loss$)$ $ $(7,600)$ $ $560$ U

n addition, the owners know that the investment in operating assets at the beginning of the month

was $$82,400,$ and it was $$77,600$ at the end of the month. They have asked for your assistance in evalu$-$

ating their current performance reporting system.

Instructions

a$.$ Prepare an investment center responsibility report for the Preventative Services segment for May $2020.$

b$.$ Write a memo to the owners discussing the defi ciencies of their current reporting system.