Question

Munoz Corporation has four divisions: the assembly division, the processing division, the machining division, and the packing division. All four divisions are under the control of the vice president of manufacturing. Each division has a manager and several departments that are directed by supervisors. The chain of command runs downward from vice president to division manager to supervisor. The processing division is composed of the paint and finishing departments. The May responsibility reports for the supervisors of these departments follow. Budgeted* Actual Variance $ 52,000 58,700 5,800 3,600 $120, 100 $ 54,000 66,000 4,770 3,360 $128,130 $ 2,000 U 7,300 U 1,030 F 240 F $ 8,030 U Paint Department Controllable costs Raw materials Labor Repairs Maintenance Total Finishing Department Controllable costs Raw materials Labor Repairs Maintenance Total $ 40,000 45,300 3,330 2,280 $ 90, 910 $ 38,000 40,900 3,770 2,850 $ 85,520 $ 2,000 F 4,400 F 440 U 570 U $ 5,390 F *Munoz uses flexible budgets for performance evaluation. Other pertinent cost data for May follow. Budgeted* Actual Cost data of other divisions Assembly Machining Packing Other costs associated with Processing division manager Vice president of manufacturing $385,000 295,000 419,950 $375,300 306,400 406,700 222,000 133,000 219,600 140,560 *Munoz uses flexible budgets for performance evaluation.

Answer 1

Page: No M лю Variance Answer Question @ Responsibility report for the manager of the processing division controllable costs Budget Actual Paints depantment $120,100 #128,130 +8030 V Finishing departm $90,910 $85,520 $5390 F other costs $299,000 $219,600 2400F Total $433,010 $ 433250 $2400 Responsibility report for the vice president of manel facluering controllable costs Budget Actual A membly division 385000 $375300 $9400 Processing division * 433010 $433250*2400 Machining division 1295000 $306,400 $11,400 U $419950 $406,700 13,250 F other costs $133000 $14056 0 $75600 Total $1,665,960 $1,662,210 $3750 F Variance Packing divizion Questiona © Return on investment (ROI) - Net operating income Wet operating investments

Page No@ RO1 $ 40570 189,636 -9700 $40510 $179,936 22.55% Additional income on news Powerf ments – $89000 x 16%. $14,240 Present set income + addition Ecome on neul investments New net opegating New ROI assets 40570 + 14240 54810 268,936 (189636 -9700) +89000 20.38% ce Residual income At operating income -Cavenage operating auxels x minimum required return on 40570-( 179,936 x 147) assets $ 15,379

e ) . Revised residual income. Revised net operating income Revited average operating axels x minimum required relwrn on assen) (268936 X 147.) - 54810 - 37651,04 = 54810 $17,159