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A responsibility accounting system is a system of evaluating the performance of the business based on the performance of different responsibility centers and their managers.

% Variance has been computed by the following formula 鈥�

$\mathbf{\%}\mathbf{Variance}\mathbf{=}\frac{\mathbf{Flexible}\mathbf{}\mathbf{Budget}\mathbf{}\mathbf{Variance}}{\mathbf{Flexible}\mathbf{}\mathbf{Budget}}\mathbf{脳}\mathbf{100}$

A responsibility center is a part of the organization for which a manager has been appointed as an authority for decision-making and has the accountability for those decisions.

Based on the given data, the responsibility center is the profit center. The responsibility center is responsible for both revenue and cost. In the given data set, the responsibility center presented the performance report for Sales revenue and all expenses. So this is a profit center.

The management criteria are to investigate all items having variances 鈥�

a) Equal to and exceeding $8,000 and

b) Exceeding 10%

Since both the conditions must be met, so from the performance report, only the 鈥淭raceable Fixed Expenses鈥� should be investigated as it has a $14,000 unfavorable variance and variance exceeds 10%.

Besides this other items has more than $8,000 variance, but no item has a variance exceeding 10%.

For making an effective analysis both favorable and unfavorable variances should be investigated.

Unfavorable variances are given priority as the business wants to locate the reasons for having an unfavorable estimate. But at the same time investigating favorable variances also helps in knowing the factors for having favorable results.

Thus for effective decision making both favorable and unfavorable variances should be investigated.

Variances are the difference between estimated and actual results. In the given case, the responsibility center is the profit center. In the profit center, both revenue and cost are controlled.

For every generated revenue, there is some cost associated with it. Some cost is variable and changes as per the sales volume. But some costs are fixed and are not affected by the sales volume.

Thus it is not possible that variances are due to higher-than-expected sales volume. Irrespective of sales volume, the fixed expense may vary from the expected amount.

Although management is investigating variances above $8,000 and 10%. But it will not pace equal weight on all variances exceeding $8,000. Some variances having $8,000 value do not vary very much from the flexible budget. While some variances exceeding $8,000 has even higher variance percent from the benchmarking.

So management would place the weight as per the degree of variance for each item. Variance having a 50% result would be given more priority than the variance having only a 10% change.

The balanced scorecard is a performance evaluation report that consists of both financial performance and operational performance. Thus based on these two areas, a balanced scored card can have different four perspectives

In the given case, the balanced card perspective is Financial. This is justified as the key performance indicators are 鈥� Sales revenue growth, gross margin growth, Net income, etc.

The other three different perspectives are 鈥� Customer, Internal Business, and Learning & Growth.

The key performance indicator for each perspective is as follows 鈥�