Dinkle Manufacturing Company manufactures a variety of tools and industrial equi

Question

Dinkle Manufacturing 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, 2010, and relevant budget data are as follows.
Actual
Comparison
with Budget

Sales $1,500,000 $104,300 favorable
Variable cost of goods sold 700,000 63,000 unfavorable
Variable selling and administrative expenses 126,000 26,300 unfavorable
Controllable fixed cost of goods sold 179,500 On target
Controllable fixed selling and administrative expenses 82,900 On target


Average operating assets for the year for the Home Division were $2,506,000 which was also the budgeted amount.





Complete the responsibility report for the Home Division. (If answer is zero, please enter 0, do not leave any fields blank. Round ROI to 1 decimal place.)
DINKLE MANUFACTURING COMPANY
Home Division
Responsibility Report
For the Year Ended December 31, 2010

Difference
Favorable F
Budget
Actual
Unfavorable U

Sales $
$
$
FU
Variable costs
Cost of goods sold UF
Selling & admin.


UF
Tot. variable costs


FU
Contribution margin


UF
Contr. direct fixed costs
Cost of goods sold
Selling & admin.



Tot. fixed costs



Controllable margin $
$
$
UF

ROI % % % UF







Compute the expected ROI in 2011 for the Home Division, assuming the following independent changes to actual data. (Round answers to 1 decimal place, e.g. 5.1.)
Variable cost of goods sold is decreased by 6%.
Average operating assets are decreased by 10%.
Sales are increased by $208,300, and this increase is expected to increase contribution margin by $98,200.
1. %
2 %
3. %







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Explanation / Answer

            DINKLE MANUFACTURING COMPANY
                              Home Division
                       Responsibility Report
             For the Year Ended December 31, 2010

                                                                             Difference
                                                                            Favorable F
                                    Budget          Actual       Unfavorable U

Sales                          $1,395,700 $1,500,000    $104,300 F

Variable costs
Cost of goods sold        $637,000    $700,000      $63,000 U
Selling & admin.             $99,700     $126,000       $26,300 U
Total variable costs   $736,700     $826,000       $89,300 U

Contribution margin   $659,000     $674,000        $15,000 F

Contr.direct FC          
Cost of goods sold     $179,500     $179,500                   0
Selling & admin.           $82,900       $82,900                   0
Total fixed costs      $262,400    $262,400                  0

Controllable margin   $396,600      $411,600       $15,000 F
ROI                               15.8%            16.4%            0.6% F

Compute the expected ROI in 2011 for the Home Division, assuming the following independent changes to actual data. (Round answers to 1 decimal place, e.g. 5.1.)

Variable cost of goods sold is decreased by 6%.
1. [$396,600 + ($637,000 x 6%)] / $2,506,000  17.4%

Average operating assets are decreased by 10%.
2   $396,600 / ($2,506,000 x 90%)  17.6%

Sales are increased by $208,300, and this increase is expected to increase contribution margin by $98,200.
3. ($396,600 + $98,200) / $2,506,000  19.7%

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