Question

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, 2017, and relevant budget data are as follows. Actual Sales Variable cost of goods sold Variable selling and administrative expenses Controllable fixed cost of goods sold Controllable fixed selling and administrative expenses $1,401,000 676,000 126,000 170,000 79,000 Comparison with Budget $100,000 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. (a) Your answer is partially correct. Try again. Prepare a responsibility report for the Home Division. (List variable costs before fixed costs. Round ROI to 1 decimal place, e.g. 1.5.) OPTIMUS COMPANY Home Division Responsibility Report For the Year Ended December 31, 2017 Difference Favorable Unfavorable Neither Favorable nor Unfavorable Budget Actual Sales 1401000 1400000 Favorable Variable costs Cost of Goods Sold 620000 665000 4500 Unfavorable Selling and Administrative 100000 126000 Tunfavorable Total Variable costs 720000 790000 Unfavorable Contribution Margin 580000 610000 Favorable Controllable Direct Fixed Costs Costs Cost of Goods Sold 200 270000 Neither Favorable nor Unfavorable - Selling and Administrative 79000 79000 Neither Favorable nor Unfavorable - Total Controllable Direct Fixed Costs 250000 250000 Neither Favorable nor Unfavorable - Controllable Margin T 330000 1 260000 Favorable ROI avorable

Answer 1

OPTIMUS COMPANY Home Division Responsibility Report

For the year ended December 31, 2017

Budget Actual Difference Favourable Unfavourable Neither Favourable nor Unfavourable Sales $1,301,000 $1,401,000 $100,000 Favourable Variable Cost Cost of Goods Sold $621,000 $676,000 $55,000 Unfavourable Selling and Administrative $101,000 $126,000 $25,000 Unfavourable Total Variable Cost $722,000 $802,000 $80,000 Unfavourable Contribution Margin $579,000 $599,000 $20,000 Favourable Controllable Direct Fixed Cost Cost of Goods Sold $170,000 $170,000 0 Neither Favourable nor Unfavourable Selling and Administrative $79,000 $79,000 0 Neither Favourable nor Unfavourable Total Controllable Direct Fixed Cost $249,000 $249,000 0 Neither Favourable nor Unfavourable Controllable Margin $330,000 $350,000 $20,000 Favourable ROI 16.5% 17.5% 1% Favourable

Formulas Used

1. Contribution Margin = Sales - Total Variable Cost

2. Controllable Margin = Contribution Margin - Total Controllable Direct Fixed Cost

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Controllable Margin Average Operating Assets