Average operating assets for the year for the home division

Reference no: EM13581142

Suppan 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, 2014, and relevant budget data are as follows.

	Actual	Comparison with Budget
Sales	$1,400,140	$100,720	favorable
Variable cost of goods sold	674,860	55,330	unfavorable
Variable selling and administrative expenses	125,270	25,500	unfavorable
Controllable fixed cost of goods sold	169,800	On target
Controllable fixed selling and administrative expenses	80,210	On target

Average operating assets for the year for the Home Division were $2,000,700 which was also the budgeted amount.

Compute the expected ROI in 2014 for the Home Division, assuming the following independent changes to actual data

(1)

Variable cost of goods sold is decreased by 7%

(2)

Average operating assets are decreased by 10%.

(3)

Sales are increased by $200,800, and this increase is expected to increase contribution margin by $84,270

	Actual	Comparison with Budget
Sales	$1,400,140	$100,720	favorable
Variable cost of goods sold	674,860	55,330	unfavorable
Variable selling and administrative expenses	125,270	25,500	unfavorable
Controllable fixed cost of goods sold	169,800	On target
Controllable fixed selling and administrative expenses	80,210	On target

Average operating assets for the year for the Home Division were $2,000,700 which was also the budgeted amount.

Compute the expected ROI in 2014 for the Home Division, assuming the following independent changes to actual data

(1)

Variable cost of goods sold is decreased by 7%

(2)

Average operating assets are decreased by 10%.

(3)

Sales are increased by $200,800, and this increase is expected to increase contribution margin by $84,270

Reference no: EM13581142

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