Bonita 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, 2020, and relevant budget data are as follows. Actual Comparison with Budget Sales $1,399,000 $101,000 favorable Variable cost of goods sold 680,000 55,000 unfavorable Variable selling and administrative expenses 124,000 25,000 unfavorable Controllable fixed cost of goods sold 171,000 On target Controllable fixed selling and administrative expenses 81,000 On target Average operating assets for the year for the Home Division were $2,000,000 which was also the budgeted amount. Compute the expected ROI in 2020 for the Home Division, assuming the following independent changes to actual data. (Round ROI to 2 decimal places, e.g. 1.57%.) The expected ROI (1) Variable cost of goods sold is decreased by 7%. % (2) Average operating assets are decreased by 12.5%. % (3) Sales are increased by $200,000, and this increase is expected to increase contribution margin by $85,000.
Bonita 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, 2020, and relevant budget data are as follows. Actual Comparison with Budget Sales $1,399,000 $101,000 favorable Variable cost of goods sold 680,000 55,000 unfavorable Variable selling and administrative expenses 124,000 25,000 unfavorable Controllable fixed cost of goods sold 171,000 On target Controllable fixed selling and administrative expenses 81,000 On target Average operating assets for the year for the Home Division were $2,000,000 which was also the budgeted amount. Compute the expected ROI in 2020 for the Home Division, assuming the following independent changes to actual data. (Round ROI to 2 decimal places, e.g. 1.57%.) The expected ROI (1) Variable cost of goods sold is decreased by 7%. % (2) Average operating assets are decreased by 12.5%. % (3) Sales are increased by $200,000, and this increase is expected to increase contribution margin by $85,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Bonita 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, 2020, and relevant budget data are as follows.
|
Actual
|
Comparison with Budget
|
||||
| Sales | $1,399,000 | $101,000 | favorable | ||
| Variable cost of goods sold | 680,000 | 55,000 | unfavorable | ||
| Variable selling and administrative expenses | 124,000 | 25,000 | unfavorable | ||
| Controllable fixed cost of goods sold | 171,000 | On target | |||
| Controllable fixed selling and administrative expenses | 81,000 | On target |
Average operating assets for the year for the Home Division were $2,000,000 which was also the budgeted amount.
Compute the expected
|
The expected ROI
|
|||||
| (1) | Variable cost of goods sold is decreased by 7%. |
|
% | ||
| (2) | Average operating assets are decreased by 12.5%. |
|
% | ||
| (3) | Sales are increased by $200,000, and this increase is expected to increase contribution margin by $85,000. |
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