Managerial Accounting (Budgeting)

Alosio Manufacturing Company manufactures a variety of tools and industrial equipment. The company operates three divisions. Each division is an investment centre. Operating data for the home division for the year ended December 31,2020, and relevant budget data are as follows:

	Actual	Comparison with budget
Sales	$1,400,000	$100,000 Favorable
Variable cost of goods sold	$675,000	$55,000 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 million, which was also the budgeted amount.

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) Calculate the ROI in 2020 for the home division, assuming the following independent changes to actual data:

1) The variable cost of goods sold decrease by 5%.

2) The average operating assets decrease by 10%.

3) Sales increase by $200,000 and this increase in expected to increase the contribution margin by $85,000.