The Sports Equipment Division of Harrington Company is operated as a profit cent

Question

The Sports Equipment Division of Harrington Company is operated as a profit center. Sales for the division were budgeted for 2014 at $ 901,800. The only variable costs budgeted for the division were cost of goods sold ($444, 760) and selling and administrative ($62,680). Fixed costs were budgeted at $103, 920 for cost of goods sold, $89, 290 for selling and administrative, and $74, 800 for noncontrollable fixed costs. Actual results for these items were: Prepare a responsibility report for the Sports Equipment Division for 2014. (List variable costs before fixed costs.) Assume the division is an investment center, and average operating assets were $1,034,000. The noncontrollable fixed costs are controllable at the investment center level. Compute ROI. (Round ROI to 1 decimal places, e.g. 1.5%.)

Explanation / Answer

HARRINNGTON COMPANY

Sports Equipment Division

Responsibility Report

2014

Budget

Actual

Difference(Favorable/Unfavorable)

Sales

$901800

$882940

$18860 U

Variable Costs

Cost of Goods Sold

$444760

$411480

$33280 F

Selling and Administrative

$62680

$63040

$360      U

Total

$507440

$474520

$32920

Contribution Margin

$394360

$408420

$14060 F

Controllable Fixed Costs

Cost of Goods Sold

$103920

$108460

$4540 U

Selling and Administrative

$89290

$66090

$23200 F

Total

$193210

$174550

18660 F

Controllable Margin

$201150

$233870

32720 F

Return on Investment = ($233870-$93720)/$1034000)

                                            = 13.55%

HARRINNGTON COMPANY

Sports Equipment Division

Responsibility Report

2014

Budget

Actual

Difference(Favorable/Unfavorable)

Sales

$901800

$882940

$18860 U

Variable Costs

Cost of Goods Sold

$444760

$411480

$33280 F

Selling and Administrative

$62680

$63040

$360      U

Total

$507440

$474520

$32920

Contribution Margin

$394360

$408420

$14060 F

Controllable Fixed Costs

Cost of Goods Sold

$103920

$108460

$4540 U

Selling and Administrative

$89290

$66090

$23200 F

Total

$193210

$174550

18660 F

Controllable Margin

$201150

$233870

32720 F

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