Optimus 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, 2020, and relevant budget data are as follows.

Average operating assets for the year for the Home Division were $2,000,000 which was also the budgeted amount.

Instructions

a. Prepare a responsibility report (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 2020 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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Actual Comparison with Budget $1,400,000 665,000 Sales Variable cost of goods sold Variable selling and administrative expenses Controllable fixed cost of goods sold Controllable fixed selling and administrative $100,000 favorable 45,000 unfavorable 25,000 unfavorable On target 125,000 170,000 ex penses 80,000 On target