Need help with part C which asks... Compute the expected ROI in 2013 for the Hom
ID: 2474476 • Letter: N
Question
Need help with part C which asks... Compute the expected ROI in 2013 for the Home Division, assuming the following independent changes to actual data. (Round ROI to 1 decimal place, e.g. 1.5.) There's no part B. I already finished part A which I got all correct.
Actual
Comparison with Budget
*(a)
SUPPAN MANUFACTURING COMPANY
Home Division
Responsibility Report
For the Year Ended December 31, 2012
Difference
Budget
Actual
Favorable F
Unfavorable U
Neither Favorable
nor Unfavorable N
*(c)
The expected ROI
Suppan 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, 2012, and relevant budget data are as follows.Actual
Comparison with Budget
Sales $1,500,420 $100,810 favorable Variable cost of goods sold 698,450 59,330 unfavorable Variable selling and administrative expenses 125,110 24,840 unfavorable Controllable fixed cost of goods sold 169,840 On target Controllable fixed selling and administrative expenses 79,330 On targetAverage operating assets for the year for the Home Division were $2,499,300 which was also the budgeted amount.
*(a)
Your answer is correct. Prepare a responsibility report for the Home Division. (Round ROI to 1 decimal place, e.g. 1.5.)SUPPAN MANUFACTURING COMPANY
Home Division
Responsibility Report
For the Year Ended December 31, 2012
Difference
Budget
Actual
Favorable F
Unfavorable U
Neither Favorable
nor Unfavorable N
Sales
$1,399,610
$1,500,420
$100,810
F
Variable Costs
Cost of Goods Sold
639,120
698,450
59,330
U
Selling and Administrative
100,270
125,110
24,840
U
Total Variable Costs
739,390
823,560
84,170
U
Contribution Margin
660,220
676,860
16,640
F
Controllable Direct Fixed Costs
Cost of Goods Sold
169,840
169,840
0
N
Selling and Administrative
79,330
79,330
0
N
Total Controllable Direct Fixed Costs
249,170
249,170
0
N
Controllable Margin
$411,050
$427,690
$16,640
F
ROI16.4
%17.1
%0.7
%F
Attempts: 2 of 5 used*(c)
Your answer is incorrect. Try again. Compute the expected ROI in 2013 for the Home Division, assuming the following independent changes to actual data. (Round ROI to 1 decimal place, e.g. 1.5.)The expected ROI
(1) Variable cost of goods sold is decreased by 6%. % (2) Average operating assets are decreased by 11%. % (3) Sales are increased by $199,020, and this increase is expected to increase contribution margin by $90,070. %Explanation / Answer
1. If Variable cost of goods sold is decreased by 6%,
Controllable Margin = 427,690 - 823,560 X 6% = $ 378,276.4
So, The expected ROI = ($ 378,276.4/$2,499,300) X 100 = 15.1%
2. If Average operating assets are decreased by 11%.
The expected ROI = (($ 427,690/($2,499,300*89%))*100 = 19.2%
3. If Sales are increased by $199,020, and this increase is expected to increase contribution margin by $90,070.
The expected ROI = (($427,690+$90070)/$2499300)*100 = 20.7%
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