Dinkle 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, 2008, and relevant budget data are as follows.
- Comparison
- with Budget
- Sales $1,500,000 $100,000 favorable
- Variable cost of goods sold 700,000 60,000 unfavorable
- Variable selling and administrative expenses 125,000 25,000 unfavorable
- 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 $2,500,000 which was also the budgeted amount.Prepare a responsibility report for the Home Division.
- DINKLE MANUFACTURING COMPANY
- Home Division
- Responsibility Report
- For the Year Ended December 31, 2008
- Budget
- Actual
- Unfavorable U
- SalesVariable costs
- Cost of goods sold
- Selling & admin.
- Tot. variable costs
- Contribution margin
- Contr. direct fixed costs
- Cost of goods sold
- Selling & admin.
- Tot. fixed costs
- Controllable margin
Compute the expected ROI in 2009 for the Home Division, assuming the following independent changes to actual data.
- Variable cost of goods sold is decreased by 6%.
- Average operating assets are decreased by 10%.
- Sales are increased by $200,000, and this increase is expected to increase contribution margin by $90,000.