Question

The Sports Equipment Division of Harrington Company is operated as a profit center. Sales for the division were budgeted for 2020 at $902,000. The only variable costs budgeted for the division were cost of goods sold ($444,000) and selling and administrative ($63,000). Fixed costs were budgeted at $104,000 for cost of goods sold, $95,000 for selling and administrative, and $72,000 for noncontrollable fixed costs. Actual results for these items were:

Sales		$887,000
Cost of goods sold
Variable		409,000
Fixed		104,000
Selling and administrative
Variable		65,000
Fixed		70,000
Noncontrollable fixed		94,000

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct.

Prepare a responsibility report for the Sports Equipment Division for 2020. (List variable costs before fixed costs.)

HARRINGTON COMPANY Sports Equipment Division Responsibility Report For the Year Ended December 31, 2020
	Budget		Actual		Difference
					FavorableUnfavorableNeither Favorablenor Unfavorable
Sales	$		$		$	Neither Favorable nor Unfavorable/ Unfavorable/ Favorable
Variable Costs
Cost of Goods Sold						Neither Favorable nor Unfavorable/ Favorable/ Unfavorable
Selling and Administrative						Unfavorable/ Neither Favorable nor Unfavorable/ Favorable
Total Variable Costs						Unfavorable/ Neither Favorable nor Unfavorable/ Favorable
Contribution Margin						Neither Favorable nor Unfavorable/ Favorable/ Unfavorable
Controllable Fixed Costs
Cost of Goods Sold						Unfavorable/ Neither Favorable nor Unfavorable/ Favorable
Selling and Administrative						Favorable/ Unfavorable/ Neither Favorable nor Unfavorable
Total Controllable Fixed Costs						Neither Favorable nor Unfavorable/ Favorable/ Unfavorable
Controllable Margin	$		$		$	Unfavorable/ Favorable/Neither Favorable nor Unfavorable

  

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. (Round ROI to 1 decimal place, e.g. 1.5.)

Return on investment

Answer 1

Responsibility Report
For the year ended December 31,2020
	Budget	Actual	Difference
Sales	902000	887000	15000	Unfavorable
Variable costs
Cost of goods sold	444000	409000	35000	Favorable
Selling and administrative costs	63000	65000	2000	Unfavorable
Total Variable costs	507000	474000	33000	Favorable
Contribution margin	395000	413000	18000	Favorable
Controllable fixed costs
Cost of goods sold	104000	104000	0	Neither Favorable nor Unfavorable
Selling and administrative costs	95000	70000	25000	Favorable
Total Controllable fixed costs	199000	174000	25000	Favorable
Controllable margin	196000	239000	43000	Favorable
2
Return on investment	14.5%	=(239000-94000)/1000000