Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 10, Problem 10.5AP
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 fol lows.
| Actual | Comparison with Budget | |
| Sales | $1,400,000 | $100,000 favorable |
| Variable cost of goods sold | 665,000 | 45,000 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 target |
Average operating assets for the year for the Home Division were $2,000,000 which was also the budgeted amount.
Instructions
(a) Prepare a responsibility report (in thousands of dollars) for the Home Division.
(b) Evaluate the manager's performance. Which items will likely be investigated by top management?
(c) Compute the expected
(1) Variable cost of goods sold is decreased by 5%.
(2) Average operating assets arc decreased by 10%.
(3) Sales are increased by $200,000. and this increase is expected to increase contribution margin by $80,000.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Bramble 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, 2022, and relevant budget data are as follows.
Actual
Comparison with Budget
Sales
$1,400,000
$101,000
favorable
Variable cost of goods sold
680,000
56,000
unfavorable
Variable selling and administrative expenses
124,000
24,000
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. Prepare a responsibility report for the home division.
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, 2020, and relevant budget data are as follows. Actual Comparison with Budget Sales $1,400,000 $100,000
favorable Variable cost of goods sold 680, 000 56,000 unfavorable Variable selling and administrative expenses
124,000 24,000 unfavorable Controllable fixed cost of goods sold 169,000 On target Controllable fixed selling and
administrative expenses 83,000 On target Average operating assets for the year for the Home Division were $2,000,000
which was also the budgeted amount. Prepare a responsibility report for the Home Division. (List variable costs before
fixed costs. Round ROI to 2 decimal places, e.g. 1.57% .) OPTIMUS COMPANY Home Division Responsibility Report
For the Year Ended December 31, 2020
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.
(a)
Prepare a responsibility report for the Home Division. (List variable costs before fixed costs. Round ROI to 2 decimal places, e.g. 1.57%.)
BONITA COMPANYHome DivisionResponsibility ReportFor the Year Ended…
Chapter 10 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 10 - Prob. 1QCh. 10 - The following purposes are part of a budgetary...Ch. 10 - How may a budget report for the second quarter...Ch. 10 - Ken Bay questions the usefulness of a master sales...Ch. 10 - Under what circumstances may a static budget be an...Ch. 10 - A flexible budget is really a series of static...Ch. 10 - The static manufacturing overhead budget based on...Ch. 10 - A static overhead budget based on 40,000 direct...Ch. 10 - Megan Pedigo is confused about how a flexible...Ch. 10 - Call Company has prepared a graph of flexible...
Ch. 10 - The flexible budget formula is fixed costs 50,000...Ch. 10 - What is management by exception? What criteria may...Ch. 10 - What is responsibility accounting? Explain the...Ch. 10 - Prob. 14QCh. 10 - Distinguish between controllable and...Ch. 10 - How do responsibility reports differ from budget...Ch. 10 - Prob. 17QCh. 10 - Distinguish among the three types of...Ch. 10 - Prob. 19QCh. 10 - Prob. 20QCh. 10 - Prob. 21QCh. 10 - Prob. 22QCh. 10 - Prob. 23QCh. 10 - Prob. 24QCh. 10 - Prob. 25QCh. 10 - Prob. 26QCh. 10 - For the quarter ended March 31, 2017, Croix...Ch. 10 - Data for Croix Company are given in BE10-1. In the...Ch. 10 - In Rooney Company, direct labor is 20 per hour....Ch. 10 - Gundy Company expects to produce 1,200,000 units...Ch. 10 - Data for Gundy Company are given in BE10-4. In...Ch. 10 - In the Assembly Department of Hannon Company,...Ch. 10 - Torres Company accumulates the following summary...Ch. 10 - For the year ending December 31, 2017, Cobb...Ch. 10 - Prob. 10.9BECh. 10 - Prob. 10.10BECh. 10 - Prob. 10.11BECh. 10 - Prob. 10.12BECh. 10 - Wade Company estimates that it will produce 6,000...Ch. 10 - In Pargo Company's flexible budget graph, the...Ch. 10 - Prob. 10.3DICh. 10 - Prob. 10.4DICh. 10 - Connie Rice has prepared the following list of...Ch. 10 - Crede Company budgeted selling expenses of 30,000...Ch. 10 - Myers Company uses a flexible budget for...Ch. 10 - Using the information in E10-3. assume that in...Ch. 10 - Fallon Company uses flexible budgets to control...Ch. 10 - The actual selling expenses incurred in March 2017...Ch. 10 - Appliance Possible Inc. (AP) is a manufacturer of...Ch. 10 - Rensing Groomers is in the dog-grooming business....Ch. 10 - As sales manager, Joe Batista was given the...Ch. 10 - Chubbs Inc.'s manufacturing overhead budget for...Ch. 10 - UrLink Company is a newly formed company...Ch. 10 - Venetian Company has two production departments....Ch. 10 - Fey Company's Organization chart includes the...Ch. 10 - The Mixing Department manager of Malone Company is...Ch. 10 - Horatio Inc. has three divisions which are...Ch. 10 - The Sports Equipment Division of Harrington...Ch. 10 - The South Division of Wiig Company reported the...Ch. 10 - The Dinkle and Frizell Denial Clinic provides both...Ch. 10 - The Ferrell Transportation Company uses a...Ch. 10 - Presented below is selected information for three...Ch. 10 - Presenled below is selected financial information...Ch. 10 - Bumblebee Company estimates that 300,000 direct...Ch. 10 - Zelmer Company manufactures tablecloths. Sales...Ch. 10 - Ratchet Company uses budgets in controlling costs....Ch. 10 - Clarke Inc. operates the Patio Furniture Division...Ch. 10 - Optimus Company manufactures a variety of tools...Ch. 10 - Durham Company uses a responsibility reporting...Ch. 10 - Sentinel Industries has manufactured prefabricated...Ch. 10 - CURRENT DESIGNS The Current Designs staff has...Ch. 10 - Green Pastures is a 400-acre farm on the outskirts...Ch. 10 - Prob. 10.2BYPCh. 10 - Prob. 10.3BYPCh. 10 - The manufacturing overhead budget for Fleming...Ch. 10 - Ethics Case American Products Corporation...Ch. 10 - Considering Your Costs and Benefits Preparing a...
Additional Business Textbook Solutions
Find more solutions based on key concepts
Present Value, Present Value of an Ordinary Annuity, Present Value of an Annuity Due, Lease Payments/Various Co...
Intermediate Accounting (2nd Edition)
Communication Activity 9-1
In 150 words or fewer, explain the different methods that can be used to calculate d...
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
Fraud Case 12-1
Bill and Edna had been married two years and had just reached the point where they had enough s...
Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
Quick ratio and current ratio (Learning Objective 7) 1520 min. Consider the following data: COMPANY A B C D Cas...
Financial Accounting, Student Value Edition (4th Edition)
Determine and record job costs (Learning Objectives 2, 3, 4, 6) Red Canyon Homes manufactures prefabricated ch...
Managerial Accounting (5th Edition)
Zero beginning inventory, materials introduced in middle of process. Dot and Ken Ice Cream uses a mixing depart...
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Variable Cost Ratio, Contribution Margin Ratio Chillmax Company plans to sell 3,500 pairs of shoes at 60 each in the coming year. Unit variable cost is 21 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Fixed factory overhead is 30,000 and fixed selling and administrative expense is 48,000. Required: 1. Calculate the variable cost ratio. 2. Calculate the contribution margin ratio. 3. Prepare a contribution margin income statement based on the budgeted figures for next year. In a column next to the income statement, show the percentages based on sales for sales, total variable cost, and total contribution margin.arrow_forwardKatayama Company produces a variety of products. One division makes neoprene wetsuits. The divisions projected income statement for the coming year is as follows: Required: 1. Compute the contribution margin per unit, and calculate the break-even point in units. Repeat, using the contribution margin ratio. 2. The divisional manager has decided to increase the advertising budget by 140,000 and cut the average selling price to 200. These actions will increase sales revenues by 1 million. Will this improve the divisions financial situation? Prepare a new income statement to support your answer. 3. Suppose sales revenues exceed the estimated amount on the income statement by 612,000. Without preparing a new income statement, determine by how much profits are underestimated. 4. How many units must be sold to earn an after-tax profit of 1.254 million? Assume a tax rate of 34 percent. (Round your answer up to the next whole unit.) 5. Compute the margin of safety in dollars based on the given income statement. 6. Compute the operating leverage based on the given income statement. (Round to three significant digits.) If sales revenues are 20 percent greater than expected, what is the percentage increase in profits?arrow_forwardSales Revenue Approach, Variable Cost Ratio, Contribution Margin Ratio Arberg Companys controller prepared the following budgeted income statement for the coming year: Required: 1. What is Arbergs variable cost ratio? What is its contribution margin ratio? 2. Suppose Arbergs actual revenues are 30,000 more than budgeted. By how much will operating income increase? Give the answer without preparing a new income statement 3. How much sales revenue must Arberg earn to break even? Prepare a contribution margin income statement to verify the accuracy of your answer. 4. What is Arbergs expected margin of safety? 5. What is Arbergs margin of safety if sales revenue is 380,000?arrow_forward
- The Sales Department of Minimus Inc. has forecast sales for May 2016 to be 40,000 units. Additional information follows: Materials used in production: Direct labor hours required in production: Prepare the following: a. A production budget for May. b. A direct materials budget for May. c. A direct labor budget for May.arrow_forwardBonita 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…arrow_forwardKMC Manufacturing Company makes garden and lawn equipment. The company operates through three divisions. Each division is an investment centre. Operating data for the lawn mower division for the year ended December 31, 2020, and relevant budget data are as follows: Actual Comparison with Budget Sales $2,900,000 $150,000 unfavourable Variable cost of goods sold 1,400,000 100,000 unfavourable Variable selling and administrative expenses 300,000 40,000 favourable Controllable fixed cost of goods sold 270,000 On target Controllable fixed selling and administrative expenses 140,000 On target Average operating assets for the year for the lawn mower division were $5million, which was also the budgeted amount. Required: Prepare a responsibility report (in thousands of dollars) for the lawnmower division. Calculate the expected ROI in 2020 for the KMC division, assuming the following independent changes: The…arrow_forward
- Required information [The following information applies to the questions displayed below.] Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates for budgeting purposes and the actual results for May as shown below: Revenue Employee salaries and wages Travel expenses Other expenses Fixed Element per Month Variable Element per Customer $ 70,000 Served $ 6,300 $ 1,700 Actual Total for May $ 49,000 $ 199,000 $ 127,300 $ 620 $ 18,000 $ 46,100 When preparing its planning budget, the company estimated it would serve 30 customers per month; however, during May the company actually served 35 customers. 5. What net operating income would appear in Adger's flexible budget for May? Net operating incomearrow_forwardAyayai Inc. operates the Patio Furniture Division as a profit center. Operating data for this division for the year ended December 31, 2022, are shown here. Budget Differencefrom Budget Sales $2,490,000 $45,000 Favorable Cost of goods sold Variable 1,290,000 36,000 Favorable Controllable fixed 190,000 2,000 Unfavorable Selling and administrative Variable 210,000 6,000 Unfavorable Controllable fixed 45,000 1,000 Unfavorable Noncontrollable fixed costs 65,000 3,000 Unfavorable In addition, Ayayai incurs $175,000 of indirect fixed costs that were budgeted at $170,000. Twenty percent (20%) of these costs are allocated to the Patio Furniture Division.Prepare a responsibility report for the Patio Furniture Division for the year. (List variable costs before fixed costs.)arrow_forward4. Clarke Inc. operates the Patio Furniture Division as a profit center. Operating data for this division for the year ended December 31, 202o, are as shown below. Difference from Budget Budget Sales $2,500,000 $50,000 F Cost of goods sold Variable 1,300,000 41,000 F Controllable fixed 200,000 3,000 U Selling and administrative Variable 220,000 6,000 U Controllable fixed 50,000 2,000 U Noncontrollable fixed direct oy 70,000 4,000 U costs In addition, Clarke incurs $180,000 of indirect fixed costs that were budgeted at $175,000. Twenty percent (20%) of these costs are allocated to the Patio Furniture Division. Instructions a. Prepare a responsibility report for the Patio Furniture Division for the year. b. Comment on the manager's performance in controlling revenues and costs. C. Identify any costs excluded from the responsibility report and explain why they were excluded.arrow_forward
- i Required information [The following information applies to the questions displayed below] Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below: Revenue Employee salaries and wages Travel expenses Other expenses Fixed Element per Month Variable Element per Customer Served Actual Total for May $ 6,600 $ 213,500 $ 62,000 $ 2,300 $ 141,100 $ 540 $ 15,700 $ 41,000 $ 38,900 When preparing its planning budget the company estimated that it would serve 30 customers per month; however, during May the company actually served 35 customers. 5. What activity variances would Adger report with respect to each of its expenses for May? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive…arrow_forwardClarke Inc. operates the Patio Furniture Division as a profit center. Operating data for this division for the year ended December 31, 2020, are as shown below. Budget Differencefrom Budget Sales $2,490,200 $48,000 Favorable Cost of goods sold Variable 1,295,300 37,500 Favorable Controllable fixed 197,900 2,500 Unfavorable Selling and administrative Variable 211,700 6,800 Unfavorable Controllable fixed 50,200 1,800 Unfavorable Noncontrollable fixed costs 68,900 4,700 Unfavorable In addition, Clarke incurs $183,100 of indirect fixed costs that were budgeted at $175,500. Twenty percent (20%) of these costs are allocated to the Patio Furniture Division.Prepare a responsibility report for the Patio Furniture Division for the year.arrow_forwardRequired information [The following information applies to the questions displayed below.) Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below: Fixed Element Variable Element Actual per Customer Total per Month for May $ 182,000 $ 110,300 $ 27,200 $ 32,600 Served $ 5,600 $ 1,600 Revenue $ 55,000 Employee salaries and wages Travel expenses Other expenses 850 $ 34,000 When preparing its planning budget the company estimated that it would serve 30 customers per month; however, during May the company actually served 35 customers. 2. What amount of employee salaries and wages would be included in Adger's flexible budget for May? Amount of employee salaries and wages included in the flexible budgetarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Principles of Cost Accounting
Accounting
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Cengage Learning
Responsibility Accounting| Responsibility Centers and Segments| US CMA Part 1| US CMA course; Master Budget and Responsibility Accounting-Intro to Managerial Accounting- Su. 2013-Prof. Gershberg; Author: Mera Skill; Rutgers Accounting Web;https://www.youtube.com/watch?v=SYQ4u1BP24g;License: Standard YouTube License, CC-BY