Namath Manufacturing Co manufactures a variety tools and industrial equipment. The company operates through 3 divisions. Ea divisions is an investment center. Operating data for the Home Division for the year ended Dec 31, 2012, and relevant budget data are as follows:
Sales $1,500,00 (actual) $100,000 favorable (comparison with budget CWB)
Variable cost of goods sold $700,000 (actual)60,000 unfavorable (CWB)
Variable selling & admin expenses 125,000(actual) 25,000 unfavorable (CWB)
Controllable fixed cost of goods sold 170,000 (actual) ON TARGET - CWB
Controllable fixed selling & admin expenses 80,000 (actual) ON TARGET (CWB)
Average operating assets for the year for the Home Division were $2,500,000 which was also the budgeted amount.
a) Prepare a responsibility report in thousands of dollars for the HOme Division.
b) Evaluate manager's performance. Which items will likely be investigated by top management?
c) Compute the expected ROI in 2013 for the Home Division, assuming the following independent changes to actual data.
1) Variable cost of goods sold is decreased by 6%
2) Average operating assts are decreased by 10%
3) Sales are increased by $200,000 and this increase is expected to increase contribution margin by $90,000.