Problem 22-5A (Part Level Submission) Actual Comparison with Budget (a) OPTIMUS

Question

Problem 22-5A (Part Level Submission)

Actual

Comparison with Budget

(a)

OPTIMUS COMPANY
Home Division
Responsibility Report
For the Year Ended December 31, 2017

Difference

Budget

Actual

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

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Problem 22-5A (Part Level Submission)

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, 2017, and relevant budget data are as follows.

Actual

Comparison with Budget

Sales $1,401,000 $101,000 favorable Variable cost of goods sold 675,000 55,000 unfavorable Variable selling and administrative expenses 124,000 25,000 unfavorable Controllable fixed cost of goods sold 170,000 On target Controllable fixed selling and administrative expenses 81,000 On target
Average operating assets for the year for the Home Division were $2,001,000 which was also the budgeted amount.

(a)

Prepare a responsibility report for the Home Division. (List variable costs before fixed costs. Round ROI to 1 decimal place, e.g. 1.5.)

OPTIMUS COMPANY
Home Division
Responsibility Report
For the Year Ended December 31, 2017

Difference

Budget

Actual

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

Total Controllable Direct Fixed CostsVariable CostsContribution MarginControllable Direct Fixed CostsControllable MarginSelling and AdministrativeTotal Variable CostsGross ProfitCost of Goods SoldSales

$

$

$

FavorableUnfavorableNeither Favorable nor Unfavorable

Contribution MarginControllable Direct Fixed CostsTotal Variable CostsVariable CostsSelling and AdministrativeCost of Goods SoldGross ProfitTotal Controllable Direct Fixed CostsSalesControllable Margin

Gross ProfitTotal Variable CostsVariable CostsContribution MarginControllable Direct Fixed CostsSelling and AdministrativeTotal Controllable Direct Fixed CostsControllable MarginCost of Goods SoldSales

FavorableUnfavorableNeither Favorable nor Unfavorable

Gross ProfitControllable Direct Fixed CostsSalesTotal Variable CostsVariable CostsContribution MarginSelling and AdministrativeControllable MarginTotal Controllable Direct Fixed CostsCost of Goods Sold

FavorableUnfavorableNeither Favorable nor Unfavorable

Controllable Direct Fixed CostsTotal Controllable Direct Fixed CostsSelling and AdministrativeVariable CostsTotal Variable CostsControllable MarginCost of Goods SoldGross ProfitContribution MarginSales

FavorableUnfavorableNeither Favorable nor Unfavorable

Variable CostsTotal Variable CostsContribution MarginSalesCost of Goods SoldSelling and AdministrativeTotal Controllable Direct Fixed CostsControllable MarginControllable Direct Fixed CostsGross Profit

FavorableUnfavorableNeither Favorable nor Unfavorable

SalesCost of Goods SoldTotal Variable CostsTotal Controllable Direct Fixed CostsVariable CostsContribution MarginSelling and AdministrativeControllable Direct Fixed CostsControllable MarginGross Profit

Total Controllable Direct Fixed CostsTotal Variable CostsGross ProfitVariable CostsContribution MarginCost of Goods SoldControllable MarginControllable Direct Fixed CostsSalesSelling and Administrative

FavorableUnfavorableNeither Favorable nor Unfavorable

Variable CostsCost of Goods SoldControllable Direct Fixed CostsContribution MarginSalesTotal Variable CostsSelling and AdministrativeGross ProfitControllable MarginTotal Controllable Direct Fixed Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

SalesSelling and AdministrativeGross ProfitCost of Goods SoldTotal Controllable Direct Fixed CostsTotal Variable CostsVariable CostsContribution MarginControllable Direct Fixed CostsControllable Margin

FavorableUnfavorableNeither Favorable nor Unfavorable

SalesTotal Controllable Direct Fixed CostsContribution MarginTotal Variable CostsVariable CostsControllable Direct Fixed CostsCost of Goods SoldControllable MarginGross ProfitSelling and Administrative

$

$

$

FavorableUnfavorableNeither Favorable nor Unfavorable

ROI

%

%

%

FavorableUnfavorableNeither Favorable nor Unfavorable

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Explanation / Answer

a. Responsibility Report

Particulars Budget Actual Difference Sales $1300000 $1401000 $101000 F Variable costs Cost of goods sold 620000 675000 55000 U Selling and admin costs 99000 124000 25000 U Total variable costs 719000 799000 80000 U Contribution margin $581000 $602000 $21000 F Controllable direct fixed costs: Cost of goods sold 170000 170000 0 Selling and admin costs 81000 81000 0 Total 251000 251000 0 Total controllable margin $330000 $351000 $21000 F ROI 16.5% 17.5% 1.0% F

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