Please solve this problem Problem 22-5A (Part Level Submission) Optimus Company
ID: 2570428 • Letter: P
Question
Please solve this problem
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 $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 $1,399,000 674,000 124,000 170,000On ta 55,000 unfavorable 25,000 unfavorable 0,000 On target Average operating assets for the year for the Home Division were $2,000,000 which was also the budgeted amount.Explanation / Answer
OPTIMUS COMPANY HOME DIVISION Responsibility Report For the Ended December 31, 2017 Particulars Budget Actual Difference F / U Sales 1389000 1399000 10000 Favourable Variable Costs: Cost of goods sold 619000 674000 55000 Unfavourable Selling and admin costs 99000 124000 25000 Unfavourable Total variable cost 718000 798000 80000 Unfavourable Contribution margin(sales - Total variable costs) 671000 601000 70000 Unfavourable Controllable direct fixed costs: Cost of goods sold 170000 170000 0 Selling and admin costs 80000 80000 0 Total fixed cost 250000 250000 0 Total Controllable margin 421000 351000 70000 Unfavourable (contribution margin - total fixed cost) ROI 21.1 17.6 3.5 Unfavourable *ROI = (Total controllable margin/average operating assets) Budgeted (421000 / 2000000) * 100 21.05% Actual (351000 / 2000000) * 100 17.55% *The favourable word shows increase in revenue and decrease in costs. *The unfavourable word shows idecrease in revenue and increase in costs.