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Given below is an excerpt from a management performance report:
Budget Actual Difference
Contribution margin $1,000,000 $1,050,000 $50,000
Controllable fixed costs $ 500,000 $ 450,000 $50,000
The manager's overall performance
a. is 20% below expectations.
b. is 20% above expectations.
c. is equal to expectations.
d. cannot be determined from information given.

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hoangkhangpham94

Answer:

The answer is b. manager's overall performance is 20% above expectations.

Explanation:

The budget overall performance is:  Budgeted Contribution margin - Budgeted Controllable fixed costs = 1,000,000 - 500,000 = $500,000;

The Actual overall performance is:  Actual Contribution margin - Actual Controllable fixed costs = 1,050,000 - 450,000 = $600,000;

Variance in dollar term of actual overall performance over budget overall performance = $600,000 - $500,000 = $100,000

% variance of actual overall performance over budget overall performance = 100,000/500,000 = 20%

Thus, actual overall performance is 20% above expectation.

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