Question

Problem 22-5A (Part Level Submission) 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 $1,401,000 675,000 126,000 170,000 81,000 Comparison with Budget $100,000 favorable 55,000 unfavorable 24,000 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.

Answer 1

Home Division
Responsibility Report
For the Year Ended December 31, 2017
	Budget	Actual	Difference
Sales	1301000	1401000	100000	Favorable
Variable costs
Cost of goods sold	620000	675000	55000	Unfavorable
Selling and administrative	102000	126000	24000	Unfavorable
Total variable costs	722000	801000	79000	Unfavorable
Contribution margin	579000	600000	21000	Favorable
Controllable direct fixed costs
Cost of goods sold	170000	170000	0	Neither favorable nor Unfavorable
Selling and administrative	81000	81000	0	Neither favorable nor Unfavorable
Total Controllable direct fixed costs	251000	251000	0	Neither favorable nor Unfavorable
Controllable margin	328000	349000	21000	Favorable
ROI	16.40%	17.45%	1.05%	Favorable
or	16.4%	17.5%	1.1%	Favorable