Question

Alosio Manufacturing Company manufactures a variety of tools and industrial equipment. The company operates three divisions. Each division is an investment centre. Operating data for the home division for the year ended December 31, 2020, and relevant budget data are as follows:

	Actual	Comparison with Budget
Sales	$1,400,000	$ 100,000	favourable
Variable cost of goods sold	675,000	55,000	unfavourable
Variable selling and administrative expenses	125,000	25,000	unfavourable
Controllable fixed cost of goods sold	170,000		On target
Controllable fixed selling and administrative expenses	80,000		On target

Average operating assets for the year for the home division were $2 million, which was also the budgeted amount.

Instructions

a.  

Prepare a responsibility report (in thousands of dollars) for the home division.

Controllable margin: Budget $330,000; Actual $350,000

b.  

Evaluate the manager's performance. Which items will likely be investigated by top management?

c.  Calculate the ROI in 2020 for the home division, assuming the following independent changes to actual data:

• 1.The variable cost of goods sold decrease by 5%.
• 2.The average operating assets decrease by 10%.
• 3.Sales increase by $200,000, and this increase is expected to increase the contribution margin by $85,000.

Please explain well

Answer 1

Oggie Part A Responsibility Report Bugg c $2 Actual Particulars Sales 1400000.00 13 voo0:00 Less: 675000.00 620000' ou 125000.00 100000.00 Variable cost of goods Sold. Variable administrative expenses Contribution selling and 600000.00 580000.00 Less: 17oooooo 80000 330000 m 350000100 1> Controllable fired Cost 170000 of Goods sold. 8 Controllable fixed selling and administrative expenses. Net profit NOTES Net Profit - Contribution fired Cost Contribution Sales - Variable Cost which 3) Sales is favourable (As given in Oustion Sales is more than Budgeted Saks which 4x Variable Cost of Goods Sold is Unfavourable Actual Cost more than Budgeted cost 5) Variable Selling and administrative Expelser to Unfavouab means Acetual more than Bud d Cost Budgled , 27 means means Cost es which

Evaluation of Managers Roy means Performance 1. lako is favourable, Manager has performed well, >>V.Cent of Goods Sold and 'naniable' selling and administration are Orferonahle, Management Pleads to Cutdown ! these Costs. (Pait c) Calculation of Rot Return on Inveotment formula to Calculate Rol, Net Profit Aug cast of Investment Average cost of Suvestment Average operating Assets 17 gf Variable Cost of Goods sold is decreased bed dy 54 Changed profit= 14o00oo – (675000 X 95 %)- 125000 – 17owse $ 383750.00 - 80000 = Rol s = 19.19% 383750 loo zoooooo 19.44%. 2> # Average, operating Assets in deerewed by 10%. ROI ='350000 XY0O 2000000 x 90 37 of Sales is increased by $200000 and this good cared is expected to Increase Contribution by 8665 Nero Contribution- New profit : fixed cost 600000 + 85000 250000 435000 ROL = 435000 x 100 21.5% 2000000® I request you to please give me positive Rating