Problem 22-5A (part level submission) Suppan Company manufactures a variety of t

Question

Problem 22-5A (part level submission) Suppan 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, 2014, and relevant budget data are as follows Actual Comparison with Budget $100,700 favorable Sales Variable cost of goods sold Variable selling and administrative expenses Controllable fixed cost of goods sold Controllable fixed selling and administrative expenses $1,399,560 674,040 124,500 169,980 80,530 54,650 unfavorable 24,270 unfavorable On target On target Average operating assets for the year for the Home Division were $1,999,210 which was also the budgeted amount. (a) Your answer is correct. Prepare a responsibility report for the Home Division. (List variable costs before fixed costs. Round ROI to 1 decimal place, e.g. 1.5%.) SUPPAN MANUFACTURING COMPANY Home Division Responsibility Report For the Year Ended December 31, 2014 Difference Favorable (F) Unfavorable (U) Neither Favorable nor Unfavorable (N Budget Actual

Explanation / Answer

ROI can be calculated by the following formula : (Controllable margin/average operating asset)*100

after considering the Increase in sales of $200390 , and increasing the contribution margin by $84240

the ROI can be calculated as followed the new controllable margin is as follows:

Earlier contribution margin =$601020

Increase as given =$84240

Total margin now =$685260

(-)Total controllable direct cost =$250510

Controllable margin =$434750

Now ROI =434750/(1999210+200390)*100=19.7%

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