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.

Prepare a responsibility report for an investment center, and compute ROI. Actual Comparison with Budget Sales $1,400,000 $100,000 favorable The 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

The 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.

Controllable margin: Budget $330; Actual $360 b. Evaluate the managers 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

2.

The Sports Equipment Division of Harrington Company is operated as a profit center. Sales for the division were budgeted for 2020 at $900,000. The only variable costs budgeted for the division were the cost of goods sold ($440,000) and selling and administrative ($60,000). Fixed costs were budgeted at $100,000 for the cost of goods sold, $90,000 for selling and administrative, and $70,000 for noncontrollable fixed costs. Actual results for these items were:

Prepare a responsibility report for a profit center, and compute ROI. Sales $880,000 Cost of goods sold Variable 408,000 Fixed 105,000 Selling and administrative Variable 61,000 Fixed 66,000 Noncontrollable fixed 90,000 Instructions

a. Prepare a responsibility report for the Sports Equipment Division for 2020. b. Assume the division is an investment center, and average operating assets were $1,000,000. The noncontrollable fixed costs are controllable at the investment center level. Compute ROI using the actual amounts.