Assume this is the first year of operations for the Bellingham plant. During the
ID: 2452826 • Letter: A
Question
Assume this is the first year of operations for the Bellingham plant. During the year, the company had the following activity:
In addition, all over- or underapplied overhead and all product cost variances are adjusted to cost of goods sold.
H. Utease Corporation is planning to change its evaluation of business operations in all plants from the profit center format to the investment center format. If the average invested capital at the Bellingham plant is $9,070,000, compute the return on investment (ROI) for the first year of operations. Use the DuPont method of evaluation to compute the return on sales (ROS) and capital turnover (CT) for the plant. (Round your answers to 2 decimal places. Omit the "%" sign in your response.)
ROI = ________% ROS = ________% Capital Turnover = ________%
Manufacturing costs (per unit based on expected activity of 17,000 units or 18,700 direct labor hours): Direct materials (1.8 pounds at $10) $ 18 Direct labor (1.1 hours at $60) 66 Variable overhead (1.1 hours at $10) 11 Fixed overhead (1.1 hours at $20) 22 Standard cost per unit $ 117 Budgeted selling and administrative costs: Variable $ 4 per unit Fixed $ 1,500,000Explanation / Answer
Sales Budget v/s Actuals and Associated Costs (All Values in $) Budget Actual Variance Sales 4550000 5002500 Direct Material -234000 -328000 94000 Direct Labour -858000 -1043100 185100 Variable Overheads -143000 -87000 -56000 Fixed Overheads -286000 -1000000 714000 Variable Selling Costs -52000 Fixed Selling Costs -1500000 -1652000 100000 1037100 Total Overapplied Overheads Adjustment of Overapplied Overheads in Actuals 1037100 Net Profit 1929500 Investment Done by Utease Corporation 9070000 Return on Investment (ROI) 21.27% 21.27 Return on Sales = Net Profit/Sales Therefore, Return on Sales = 38.57% 38.57 Capital Turnover = Sales/Capital Investment Therefore, Capital Turnover Ratio = 55.15% 55.15