Erwin Plumbing Materials Company has a sales office that sells water pipes to construction companies. The sales office is a revenue center and prepares a monthly responsibility report. The partially completed responsibility report is provided. $$\begin{array}{l}
\text { Revenue Center Respansibility Repart }\
\begin{array} { |c | c | c | l | l | l | l | l| }
\hline \begin{array} { c }
\text { Product } \
\text { Type }
\end{array} & \begin{array} { c }
\text { Actual } \
\text { Sales } \
\text { Revenue }
\end{array} & \begin{array} { c }
\text { Flexible } \
\text { Budget } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c }
\text { Flexible } \
\text { Budget }
\end{array} & \begin{array} { c }
\text { Sales } \
\text { Volume } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c }
\text { Static } \
\text { Budget }
\end{array} \
\hline 40 \text { inch } & \$ 31,700 & & & \$ 30,750 & & & \$ 40,800 \
\hline 36 \text { inch long } & 40,150 & & & 42,200 & & & 33,000 \
\hline 36 \text { inch short } & 36,200 & & & 33,100 & & & 31,000 \
\hline \text { 32 inch } & 19,100 & & & 20,000 & & & 28,400 \
\hline
\end{array}
\end{array}$$ The company uses management by exception to address flexible budget variances. On which product type would the company first focus?

Question

Erwin Plumbing Materials Company has a sales office that sells water pipes to construction companies. The sales office is a revenue center and prepares a monthly responsibility report. The partially completed responsibility report is provided. $$\begin{array}{l}
\text { Revenue Center Respansibility Repart }\
\begin{array} { |c | c | c | l | l | l | l | l| } 
\hline \begin{array} { c } 
\text { Product } \
\text { Type }
\end{array} & \begin{array} { c } 
\text { Actual } \
\text { Sales } \
\text { Revenue }
\end{array} & \begin{array} { c } 
\text { Flexible } \
\text { Budget } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c } 
\text { Flexible } \
\text { Budget }
\end{array} & \begin{array} { c } 
\text { Sales } \
\text { Volume } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c } 
\text { Static } \
\text { Budget }
\end{array} \
\hline 40 \text { inch } & \$ 31,700 & & & \$ 30,750 & & & \$ 40,800 \
\hline 36 \text { inch long } & 40,150 & & & 42,200 & & & 33,000 \
\hline 36 \text { inch short } & 36,200 & & & 33,100 & & & 31,000 \
\hline \text { 32 inch } & 19,100 & & & 20,000 & & & 28,400 \
\hline
\end{array}
\end{array}$$ The company uses management by exception to address flexible budget variances. On which product type would the company first focus?

Quizplus · Accepted Answer

The company uses management by exception to address flexible budget variances, which means they only focus on significant variances. From the partially completed report, we can see that the flexible budget variance for 36 inch short pipes is the most significant with a negative variance of $6,480. Therefore, the company would first focus on improving performance and reducing costs for 36 inch short pipes.

Erwin Plumbing Materials Company Has a Sales Office That Sells