The Bramble 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 efficiency and profitability of the clinic. Recently, they have been concerned about the profitability of the Preventive Services operations. For several months, it has been reporting a loss. The responsibility report for the month of May 2017 is shown below. Actual Difference from Budget Service revenue $39,000 $900 Favorable Variable costs: Filling materials 4,000 110 Unfavorable Novocain 4,100 90 Unfavorable Supplies 2,100 340 Favorable Dental assistant wages 2,800 –0– Neither Favorable nor Unfavorable Utilities 600 100 Unfavorable Total variable costs 13,600 40 Favorable Fixed costs: Allocated portion of receptionist’s salary 2,900 200 Unfavorable Dentist salary 8,900 236 Unfavorable Equipment depreciation 5,852 –0– Neither Favorable nor Unfavorable Allocated portion of building depreciation 16,000 900 Unfavorable Total fixed costs 33,652 1,336 Unfavorable Operating income (loss) $(8,252 ) $396 Unfavorable In addition, the owners know that the investment in operating assets at the beginning of the month was $90,600, and it was $85,400 at the end of the month. They have asked for your assistance in evaluating their current performance reporting system.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter12: Liabilities: Off-balance-sheet Financing, Retirement Benefits, And Income Taxes

Section: Chapter Questions

Problem 22E

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Question 2

The Bramble 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 efficiency and profitability of the clinic.

Recently, they have been concerned about the profitability of the Preventive Services operations. For several months, it has been reporting a loss. The responsibility report for the month of May 2017 is shown below.

	Actual		Difference from Budget
Service revenue	$39,000			$900	Favorable
Variable costs:
Filling materials	4,000			110	Unfavorable
Novocain	4,100			90	Unfavorable
Supplies	2,100			340	Favorable
Dental assistant wages	2,800			–0–	Neither Favorable nor Unfavorable
Utilities	600			100	Unfavorable
Total variable costs	13,600			40	Favorable
Fixed costs:
Allocated portion of receptionist’s salary	2,900			200	Unfavorable
Dentist salary	8,900			236	Unfavorable
Equipment depreciation	5,852			–0–	Neither Favorable nor Unfavorable
Allocated portion of building depreciation	16,000			900	Unfavorable
Total fixed costs	33,652			1,336	Unfavorable
Operating income (loss)	$(8,252	)		$396	Unfavorable

In addition, the owners know that the investment in operating assets at the beginning of the month was $90,600, and it was $85,400 at the end of the month. They have asked for your assistance in evaluating their current performance reporting system.

(a)
Prepare a responsibility report for an investment center as illustrated in the chapter. (Round ROI to 1 decimal place, e.g. 1.5.)
BRAMBLE DENTAL CLINIC
Preventive Services
Responsibility Report
Difference
Favorable F
Unfavorable U
Neither Favorable
nor Unfavorable N
Budget
Actual
$
$
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Return on investment
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