Question

Optimus Company manufactures a variety of tools and industrial equipment. The company operates through three divisions....

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, 2022, and relevant budget data are as follows.

Prepare responsibility report for an investment center, and compute ROI.

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. Prepare a responsibility report (in thousands of dollars) for the Home Division.

    Controllable margin:
    Budget $330;
    Actual $360

  • b. Evaluate the manager’s performance. Which items will likely be investigated by top management?
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