Question

Brief Exercise 23-08 For the year ending December 31, 2020, Cobb Company accumulates the following data for the Plastics Division which it operates as an investment center contribution margin-$612,950 budget, $622,669 actual; controllable fixed costs-5302,000 budget, $305,500 actual. Average operating assets for the year were $2,073,000. Prepare a responsibility report for the Plastics Division beginning with contribution margin for the year ending December 31, 2020. (Round ROI to 1 decimal place, e.g. 1.5%.) COBB COMPANY Plastica Division Responsibility Report For the Year Ended December 31, 2020 Difference Favorable Unfavorable Neither Favorable nor Unfavorable

Answer 1

COBB COMPANY
Responsibility Report for the year ended December 31, 2020

Particulars	Budget	Actual	Difference (Budget- Actual)	Favorable/ Unfavorable
Contribution Margin	$612950	$622669	$9719	Favorable
Controllable Fixed cost	$302000	$305500	$3500	Unfavorable
Controllable Margin	$310950	$317169	$6219	Favorable
Return on Investment	15%	15.3%	0.30%	Favorable

Notes
- When the actual contribution margin exceeds that of the one budgeted than it is favorable for the company but controllable fixed costs like any other cost is something that company wants to minimize , therefore when actual controllable fixed cost exceeds budgeted than it is unfavorable.
- Controllable margin = (Contribution margin- Controllable fixed cost)
- Return on investment = (Controllable margin / Average operating assets)X 100