Options Company manufactures a variety of tools and industrial equipment. The company operates through three division. Each division is an investment center. Operating data for the home division for the years ended December 31,2017, and relevant budgeted data are as follows .
Actual Comparison with budget
Sales $1,400,000 $100,000 favorable
Variable cost of goods sold 665,000 45,000 unfavorable
variable selling and administrative 125,000 25,000 unfavorable
expense
controllable fixed cost of goods sold 170,000 on target
Controllable fixed selling and 80,000 on target
administrative expenses
Average operating assets for the year for the home division were $2,000,000 which was also the budgeted amount
Instructions
(a) Prepar a responsibility reported (in thousands of dollars) for the home division
(b)Evaluate the manager’s performance. Which items will likely be investigated by top management?
(c) Compute the expected ROI in 2017 for the home division, assuming the following independent changes to actual data.
(1) Variable cost of goods sold is decreased by 5 %
(2) Average operating assets are decreased by 10%
(3) Sales are increased by $200,000, and this increase is expected to increase contribution margin by $80,000
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