Below is the forecast budget information for McLeod Corporation, which produces agricultural fencing posts:

Number of units to be produced this month: 10,000

Sales Revenue 340,000

DM 80,000

DL 120,000

VMOH 70,000

Fixed Costs 17,000

Grace would like to evaluate the manager of the Fence post division, which she is treating as a Cost Center. Actual results are shown below:

Number of units actually produced this month: 11,000

Sales Revenue 377,000

DM 86,000

DL 130,000

VMOH 77,000

Fixed Costs 17,000

She would like you to determine the appropriate variance to use for DM.

a. 6,000 U

b. 6,000 F

c. 2,000 U

d. 2,000 F

Say it had been a really difficult month and sales fell to 4,000 units. Actual DM costs were $33,000 and actual DL costs were $50,000. What's the relevant DL variance that Grace should explore?

a. 82,000 F

b. 2,000 U

c. 82,000 U

d. 2,000 F

Grace also evaluates her Ag Products Subsidiary. This subsidiary has responsibility for all investment decisions. This year, she has the following results for the Ag Products Sub. How should she evaluate the management of Ag Products?

Budget Actual

Operating Profit 100,000 170,000

Avg Assets 2,000,000 2,500,000

Equity 500,000 500,000

a. Focus only on Profit, which is up $70,000

b. Focus on ROI because management controls investment in assets

c. Focus on ROE because management doesn't control investment in assets

d. Focus on Return on Sales because the investment in assets doesn't impact that number