Question

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 ($444,000) and selling and administrative ($64,000). Fixed costs were budgeted at $102,000 for cost of goods sold, $95,000 for selling and administrative, and $74,000 for noncontrollable fixed costs. Actual results for these items were:

Sales		$889,000
Cost of goods sold
Variable		414,000
Fixed		108,000
Selling and administrative
Variable		64,000
Fixed		69,000
Noncontrollable fixed		94,000

Prepare a responsibility report for the Sports Equipment Division for 2020. (List variable costs before fixed costs.)

HARRINGTON COMPANY Sports Equipment Division Responsibility Report For the Year Ended December 31, 2020
	Budget		Actual		Difference
					Favorable Unfavorable Neither Favorable nor Unfavorable

Assume the division is an investment center, and average operating assets were $1,000,000. The noncontrollable fixed costs are controllable at the investment center level. Compute ROI using the actual amounts. (Round ROI to 1 decimal place, e.g. 1.5.)

Return on investment

%

Answer 1

Answer:

				Budget	Actual	difference
	Sales			900000	889000	11000	U
	Vairbale costs
	cost of goods sold		444000	414000	30000	F
	Selling and administrative	64000	64000	0
	total variable costs		508000	478000	30000	F
	Contribution margin		392000	411000	19000	F
	Controllable fixed costs
	cost of godos sold		102000	108000	6000	U
	Selling and administrative	95000	69000	26000	F
	total controllable fixed cost	197000	177000	20000	F
	controllable margin		195000	234000	39000	F
	Returon on investment = (234000-94000)/1,000,000
			14%