Exercise 22-11 UrLink Company is a newly formed company specializing in high-spe

Question

Exercise 22-11

UrLink Company is a newly formed company specializing in high-speed Internet service for home and business. The owner, LennyKirkland, had divided the company into two segments: Home Internet Service and Business Internet Service. Each segment is run by its own supervisor, while basic selling and administrative services are shared by both segments.

Lenny has asked you to help him create a performance reporting system that will allow him to measure each segment’s performance in terms of its profitability. To that end, the following information has been collected on the Home Internet Service segment for the first quarter of 2017.

Budgeted

Actual

Prepare a responsibility report for the first quarter of 2017 for the Home Internet Service segment.

URLINK COMPANY
Home Internet Services Segment
Responsibility Report
For the Quarter Ended March 31, 2017

Difference

Budgeted

Actual

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

LINK TO TEXT

LINK TO TEXT

Budgeted

Actual

Service revenue $24,800 $25,000 Allocated portion of:      Building depreciation 10,300 10,300      Advertising 4,700 4,200      Billing 3,200 3,200      Property taxes 1,100 1,200 Material and supplies 1,400 1,300 Supervisory salaries 9,400 9,400 Insurance 4,300 3,200 Wages 2,900 3,400 Gas and oil 3,100 3,700 Equipment depreciation 1,500 1,500

Explanation / Answer

URLINK COMPANY
Home Internet Services Segment
Responsibility Report
For the Quarter Ended March 31, 2017

Budgeted actual difference Service revenue 24800 25000 200 Favorable Variable costs: Materials and supplies 1400 1300 100 favorable Wages 2900 3400 500 Unfavorable Gas and oil 3100 3700 600 Unfavorable Total variable costs 7400 8400 1000 Unfavorable Contribution margin 17400 16600 800 Unfavorable Controllable fixed cost: Supervisors Salaries 9400 9400 0 nethier favorable nor Unfavorable Insurance 4300 3200 1100 favorable Equipment depreciation 1500 1500 0 neither favorable nor Unfavorable Total controllable fixed costs 15200 14100 1100 favorable Controllable margin 2200 2500 300 favorable

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