Question

Exercise 23-16 a-b The Sports Equipment Division of Harrington Company is operated as a profit center. Sales for the division were budgeted for 2020 at $900,000. The only variable costs budgeted for the division were cost of goods sold ($440,000) and selling and administrative ($60,000). Fixed costs were budgeted at $100,000 for cost of goods sold, $90,000 for selling and administrative, and $70,000 for noncontrollable fixed costs. Actual results for these items were: $880,000 408,000 105,000 Sales Cost of goods sold Variable Fixed Selling and administrative Variable Fixed Noncontrollable fixed 61,000 66,000 90,000 Prepare a responsibility report for the Sports Equipment Division for 2020. (List variable costs before fixed costs.)

Answer 1

HARRINGTON COMPANY
Sports Equipment Division
Responsibility Report
For the Year Ended December 31, 2020
	Budget	Actual	Difference
Sales	$            900,000	$            880,000	$             20,000	Unfavorable
Variable Costs
Cost of goods sold - Variable	$            440,000	$            408,000	$             32,000	Favorable
Selling and administrative - Variable	$              60,000	$              61,000	$               1,000	Unfavorable
Total variable costs	$            500,000	$            469,000	$             31,000	Favorable
Contribution Margin	$            400,000	$            411,000	$             11,000	Favorable
Controllable Fixed Costs
Cost of goods sold	$            100,000	$            105,000	$               5,000	Unfavorable
Selling and administrative	$              90,000	$              66,000	$             24,000	Favorable
Total controllable fixed costs	$            190,000	$            171,000	$             19,000	Favorable
Controllable margin	$            210,000	$            240,000	$             30,000	Favorable

ROI = (240,000 - 90,000) / 1,000,000 = 15%