The Real Estate Products Division of Mckenzie Co is operated as a proft center S

Question

The Real Estate Products Division of Mckenzie Co is operated as a proft center Sales for the division were budgeted for 2013 at $1.250,000 The only variable costs budgetod for the division were cost of goods sold (5610,000) and selling and administrative (580,000). Flxed costs were budgeted at $130,000 for cost of goods sold, $120,000 for seling and administrative and $95,000 for noncontrollable fixed costs Actual results for these items wore Sales Cost of Goods Sold variable Floxed Selling and Administrative Variable Fixed $1,175,000 545,000 140,000 82,000 $100,000 105,000 fixed nstructions (a)Prepare a responsibility report for the Real Estate Products Division for 2013, (b) Assume the division s an investment center, and average operating assets were $1 20000 Compute RO

Explanation / Answer

(a) Responsibility Report

(b)

ROI = $203000/ 1200000

= 16.92%

Actual Amount Budget Amount Over or (Under) Budget Variable expenses: Cost of goods sold 545000 610000 (65000) Selling and administrative expenses 82000 80000 2000 Fixed expenses: Cost of goods sold 140000 130000 10000 Selling and administrative expenses 100000 120000 (20000) Noncontrollable fixed 105000 95000 10000

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