Problem 22-5A (Part Level Submission) Optimus Company manufactures a variety of

Question

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

Average operating assets for the year for the Home Division were $2,001,000 which was also the budgeted amount.

(c)

Compute the expected ROI in 2017 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

Actual

Comparison with Budget

Sales $1,401,000 $101,000 favorable Variable cost of goods sold 675,000 55,000 unfavorable Variable selling and administrative expenses 124,000 25,000 unfavorable Controllable fixed cost of goods sold 170,000 On target Controllable fixed selling and administrative expenses 81,000 On target

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer    Statementshowing Computations Paticulars Amount Case (1) Case (2) Case (3) Sales 1,401,000.00       1,401,000.00       1,401,000.00       1,602,000.00 Less Variable Expenses: Variable cost of goods sold     (675,000.00)         (641,250.00)         (675,000.00) Variable selling and admin     (124,000.00)         (124,000.00)         (124,000.00) Total Variable costs     (799,000.00)         (765,250.00)         (799,000.00)         (914,000.00) Contribution Margin       602,000.00           635,750.00           602,000.00           688,000.00 Fixed cost Fixed cost of goods sold     (170,000.00)         (170,000.00)         (170,000.00)         (170,000.00) Fixed selling and admin       (81,000.00)           (81,000.00)           (81,000.00)           (81,000.00) Total Fixed costs     (251,000.00)         (251,000.00)         (251,000.00)         (251,000.00) Net operating income       351,000.00           384,750.00           351,000.00           437,000.00 Average operating assets 2,001,000.00       2,001,000.00       1,760,880.00       2,001,000.00 Return on investment = NOI/Avg operating assets 17.54% 19.23% 19.93% 21.84%

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