Clarke Inc. operates the Patio Furniture Division as a profit center. Operating

data for this division for the year ended December 31, 2017, are as shown below.

Difference

Budget from Budget

Sales $2,500,000 $50,000 F

Cost of goods sold

Variable 1,300,000 41,000 F

Controllable fixed 200,000 3,000 U

Selling and administrative

Variable 220,000 6,000 U

Controllable fixed 50,000 2,000 U

Noncontrollable fixed costs 70,000 4,000 U

In addition, Clarke incurs $180,000 of indirect fixed costs that were budgeted at $175,000.

Twenty percent (20%) of these costs are allocated to the Patio Furniture Division.

Instructions

(a) responsibility report for the Patio Furniture Division for the year.

(b) Comment on the manager's performance in controlling revenues and costs.

(c) Identify any costs

P24-5AOptimus 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, 2017, and relevant budget data are as follows.

Actual Comparison with Budget

Sales $1,400,000 $100,000 favorable

Variable cost of goods sold 665,000 45,000 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 $2,000,000 which was also the budgeted amount.

Instructions

(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 2017 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.

P24-6ADurham Company uses a responsibility reporting system. It has divisions in Denver,

Seattle, and San Diego. Each division has three production departments: Cutting, Shaping,

and Finishing. The responsibility for each department rests with a manager who reports

to the division production manager. Each division manager reports to the vice president

of production. There are also vice presidents for marketing and fi nance. All vice presidents

report to the president.

In January 2017, controllable actual and budget manufacturing overhead cost data

for the departments and divisions were as shown below.

Manufacturing Overhead Actual Budget

Individual costsCutting DepartmentSeattle

Indirect labor $ 73,000 $ 70,000

Indirect materials 47,900 46,000

Maintenance 20,500 18,000

Utilities 20,100 17,000

Supervision 22,000 20,000

$183,500 $171,000

Total costs

Shaping DepartmentSeattle $158,000 $148,000

Finishing DepartmentSeattle 210,000 205,000

Denver division 678,000 673,000

San Diego division 722,000 715,000

Additional overhead costs were incurred as follows: Seattle division production manageractual costs $52,500, budget $51,000; vice president of productionactual costs $65,000, budget $64,000; presidentactual costs $76,400, budget $74,200. These expenses are not allocated.

The vice presidents who report to the president, other than the vice president of

production, had the following expenses.

Vice President Actual Budget

Marketing $133,600 $130,000

Finance 109,000 104,000

Instructions

(a) Using the format in Illustration 24-19 (page 1069), prepare the following responsibility reports.

(1) Manufacturing overheadCutting Department managerSeattle division.

(2) Manufacturing overheadSeattle division manager.

(3) Manufacturing overheadvice president of production.

(4) Manufacturing overhead and expensespresident.

(b) Comment on the comparative performances of:

(1) Department managers in the Seattle division.

(2) Division managers.

(3) Vice presidents