Suppan Manufacturing Company manufactures a variety of tools and industrial equipment. The...
Question:
Suppan Manufacturing Company manufactures a variety of tools and industrial equipment.
The company operates through three divisions.
Each division is an investment center.
Operating data for the Home Division for the year ended December 31, 2014 and relevant budget data are as follows:
| Actual | Comparison with Budget | |
|---|---|---|
| Sales | $1,500,760 | $100,340 favorable |
| Variable cost of goods sold | 693,690 | 59,760 unfavorable |
| Variable selling and administrative expenses | 124,690 | 25,650 unfavorable |
| Controllable fixed cost of goods sold | 169,550 | On target |
| Controllable fixed selling and administrative expenses | 80,380 | On target |
Average operating assets for the year for the Home Division were $2,499,150 which was also the budgeted amount.
Required:
1. Prepare a responsibility report and return on investment for the Home Division.
2. Compute the expected ROI in 2015 for the Home Division, assuming the following independent changes to actual data:
(Round ROI to 1 decimal place)
| Expected ROI | ||
|---|---|---|
| (1) | Variable cost of goods sold is decreased by 7% | ? % |
| (2) | Average operating assets are decreased by 11% | ? % |
| (3) | Sales are increased by $200,800 and this increase is expected to increase contribution margin by $90,480 | ? % |
Responsibility Report:
A responsibility report in an internal financial report drawn up for cost centers or investment centers in large corporations. In the report, the actual performance is compared to the budgeted expectations and the variances identified.
Answer and Explanation: 1
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1.
Home Division of Suppan Manufacturing Company
Responsibility report for 2014
| Actual | Budget | Variance | |
|---|---|---|---|
| Sales | $1,500,760 | $1,400,420 | $100,340 F |
| Va... |
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