Question

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?

Answer 1