Question

Question 7 View Policies Current Attempt in Progress Optimus Company manufactures a variety of tools and industrial equipment. The company operates through three divisions. Each division is an investment center. Operating data for the Home Division for the year ended December 31, 2020, and relevant budget data are as follows. Sales Variable cost of goods sold Variable selling and administrative expenses Controllable fixed cost of goods sold Controllable fixed selling and administrative expenses Actual $1,399,000 680.000 124,000 171,000 81,000 Comparison with Budget $101,000 favorable 55.000 unfavorable 25.000 unfavorable On target On target Average operating assets for the year for the Home Division were $2,000,000 which was also the budgeted amount. Prepare a responsibility report for the Home Division (List variable costs before fixed costs. Round ROI to 2 decimal places, eg. 1.57% OPTIMUS COMPANY Home Division Responsibility Report

Answer 1

(a) Optimus company Home division Responsibility report For the year ended dec.31, 2020

				Difference
	Budget	Actual		Favourable /Unfavorable/ Neither favorafavo nor unfavorable
Sales (a)	1298000	1399000	101000	Favourable
Variable cost:-
Cost of goods sold	-625000	-680000	55000	Unfavorable
Selling and administrative expenses	-99000	-124000	25000	Unfavorable
Total variable cost (b)	-724000	-804000	80000	Unfavorable
Contribution margin (a-b)	574000	595000	21000	Favourable
Controllable direct fixed cost :-
Cost of goods sold	-171000	-171000	0	neither favourable nor unfavorable
Selling and administrative	-81000	-81000	0	neither favourable nor unfavorable
Total controllable direct fixed cost	-252000	-252000	0	neither favourable nor unfavorable
Controllable margin	$322000	$343000	$21000	Favourable
ROI	16.10%	17.15%	1.05%	Favourable

Note :-

ROI = (controllable margin / Average operating assets ) *100

Budget = ($322000/2000000)*100 = 16.10%

Actual = ($343000/2000000)*100= 17.15%

= ($21000/2000000)*100 = 1.05%