EF P11-44A Evaluate subunit performance (Learning Objectives 3 & 4) One subunit of Speed Sports Company Company had the following financial results last month: Speed Sports-Subunit X Actual Flexible Budget Flexible Budget Variance (U Percentage Variance (U or F) Sales $486,900 $450,000 Cost of goods sold 259,500 250.000 Gross margin $227 400 $200,000 Operating expenses 60,750 50.000 Operating income before service department charges $166,650 $150,000 Service department charges 31,250 40,750 Operating income $135,900 $109,250 *Flexible budget variance + Flexible budget Requirements 1. Complete the performance evaluation report for this subunit (round to three decimal places). 2. Based on the data presented, what type of responsibility centre is this subunit? 3. Which items should be investigated if part of management's decision criteria is to investigate all variances equal to or exceeding $9,500 and exceeding 16% (both criteria must be met)? 20 5 4. Is it possible that the variances are due to a higher-than-expected sales volume? Explain. . Do you think management will place equal weight on each of the $9,500 variances? Explain. Flexible Budget Variance $ F/U Variance % F/U Actual 486,900 259.500 227,400 60.750 Flexible Budget 450,000 250,000 200,000 50,000 Sales COGS Gross Margin Operating Expenses Operating Income before Service Dept. Charges Service Department Internal Charges Operating Income 166,650 150,000 31,250 135.400 40,750 109.250