Optimus Company manufactures a variety of tools and industrial equipment. The co

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, 2017, and relevant budget data are as follows Comparison with Budget $1,401,000 100,000 favorable Sales Variable cost of goods sold Variable selling and administrative expenses Controllable fixed cost of goods sold Controllable fixed selling and administrative expenses 676,000 125,000 171,000 80,000 56,000 unfavorable 26,000 unfavorable On target On target Average operating assets for the year for the Home Division were $2,000,000 which was also the budgeted amount.

Explanation / Answer

Particulars Budget Actual Difference (Favorable F or Unfavorable U) Sales 1301000 1401000 100000 FAVORABLE Variable costs Cost of goods sold 620000 676000 56000 UNFAVORABLE Selling and admin costs 99000 125000 26000 UNFAVORABLE Total variable costs 719000 801000 82000 UNFAVORABLE Contribution margin 582000 600000 18000 FAVORABLE Cntrollable direct fixed costs Cost of goods sold 171000 171000 0 Neither Favorable nor Unfavorable Selling and admin costs 80000 80000 0 Neither Favorable nor Unfavorable Total 251000 251000 0 Neither Favorable nor Unfavorable Total controllable margin 331000 349000 18000 FAVORABLE ROI 16.6% 17.5% 0.9% FAVORABLE

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