Problem 22-5A (part level submission) Actual Comparison with Budget Warning Don\
ID: 2473203 • Letter: P
Question
Problem 22-5A (part level submission)
Actual
Comparison with Budget
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(a)
SUPPAN MANUFACTURING COMPANY
Home Division
Responsibility Report
For the Year Ended December 31, 2014
Difference
Budget
Actual
Favorable (F)
Unfavorable (U)
Neither Favorable
nor Unfavorable (N)
Problem 22-5A (part level submission)
Suppan 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, 2014, and relevant budget data are as follows.Actual
Comparison with Budget
Sales $1,400,000 $100,000 favorable Variable cost of goods sold 675,000 55,000 unfavorable Variable selling and administrative expenses 125,000 25,000 unfavorable Controllable fixed cost of goods sold 170,000 On target Controllable fixed selling and administrative expenses 80,000 On targetAverage operating assets for the year for the Home Division were $2,000,000 which was also the budgeted amount.
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Explanation / Answer
Budget Actual Difference Sales $100,000 $1,400,000 $1,300,000 F Less :Variable costs Cost of goods sold $55,000 $675,000 $620,000 U Selling and administrative expenses $25,000 $125,000 $100,000 U Total Variable costs $80,000 $800,000 $720,000 U Contribution Margin $20,000 $600,000 $580,000 F Less : Controllable direct fixed costs Cost of goods sold $170,000 $170,000 $0 N Selling and administrative expenses $80,000 $80,000 $0 N Total Controllable Direct Fixed Costs $250,000 $250,000 $0 N Controllable Margin -$230,000 $350,000 $580,000 F ROI = Controllable Margin/ $2,000,000 -11.50% 17.50% 29.00% F
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