Question

2. Point, Inc. produces men's shirts. The following budgeted and actual amounts are for 2018: Cost Direct materials Direct labor Fixed overhead Budgeted Amounts at 2.500 units Actual Amounts at 2.900 units $55,000 $65,000 $80,000 $83,000 $30,000 $34,500 Prepare a responsibility report for Point, Inc. for the year. POINT, INC. Manufacturing Performance Responsibility Report For the Year Ended December 31, 2018 Budget (2,900 units) Differences Direct Materials Direct Labor Fixed Overhead Total costs Actual $65,000 $83,000 $34,500

Answer 1

2.

	Point Inc.
Manufacturing Performance Responsibility Report
for the year ended December 31, 2018
Particulars	Budget (2900 units) $	Actual $	Differences $
Direct Materials	63,800	65,000	-1,200
Direct Labor	92,800	83,000	9,800
Fixed Overhead	30,000	34,500	-4,500
Total Costs	1,86,600	1,82,500	4,100

Budget for 2900 units calculated on pro-rata basis. eg. Direct materials 55000/2500*2900

3.

Controllable Margin = Contribution - Controllable Fixed Costs
	= 800000 - 500000 - 125000
Controllable Margin	1,75,000
Contribution is Sales minus Variable costs
Controllable margin is our operating income.
Return on Investment =	Operating Income / Average Operating Assets
	= 175000/825000*100
Return on Investment	21.21%

4.a.

Return on Investment =	Operating Income / Average Operating Assets
	= 175000/700000*100
Return on Investment	25.00%

4.b.

Increasing sales by 100000 with no change in contribution margin %
Contribution Margin %	=(800000-500000)/800000*100
	37.50%
Sales	900000	100.00
Less: Variable Cost	-562500	62.50
	----------------------------
Contribution	337500	37.50
Less: Controllable Fixed Costs	-125000
	----------------------------
Controllable Margin/Operating Income	212500
Return on Investment =	Operating Income / Average Operating Assets
	= 212500/825000*100
Return on Investment	25.76%