Problem 2
The Sports Equipment Division of Jorgensen Company is operated as a profit center. Sales for the division were budgeted for 2011 at $900,000. The only variable costs budgeted for the division were cost of goods sold ($440,000) and selling and administrative ($60,000). Fixed costs were budgeted at $100,000 for cost of goods sold, $90,000 for selling and administrative and $70,000 for noncontrollable fixed costs. Actual results for these items were:
Sales $870,000
Cost of goods sold
Variable 405,000
Fixed 105,000
Selling and administrative
Variable 62,000
Fixed 78,000
Noncontrollable fixed 80,000
Instructions
(a) Prepare a responsibility report for the Sports Equipment Division for 2011.
(b) Assume the division is an investment center, and average operating assets were $1,000,000. Compute ROI.
Solution
Budgeted Actual Sales 900000 870000 Cost of goods sold   Variable 440000 405000   Fixed 100000 105000 Selling and administrative   Variable 60000 62000    Fixed 90000 78000 Noncontrollable fixed 70000 80000 Responsibility Report Budgeted Actual Difference Favorable or Unfavorable Sales 900000 870000 30000 U Variable Costs 500000 467000 33000 U Contribution margin 400000 403000 3000 F Controllable fixed costs 190000 183000 7000 F Controllable margin 210000 220000 10000 F Return on investment 21.00% 22.00%
.
Problem 2 The Sports Equipment Division of Jorgensen Company is operat.docx
1. Problem 2
The Sports Equipment Division of Jorgensen Company is operated as a profit center. Sales for
the division were budgeted for 2011 at $900,000. The only variable costs budgeted for the
division were cost of goods sold ($440,000) and selling and administrative ($60,000). Fixed
costs were budgeted at $100,000 for cost of goods sold, $90,000 for selling and administrative
and $70,000 for noncontrollable fixed costs. Actual results for these items were:
Sales $870,000
Cost of goods sold
Variable 405,000
Fixed 105,000
Selling and administrative
Variable 62,000
Fixed 78,000
Noncontrollable fixed 80,000
Instructions
(a) Prepare a responsibility report for the Sports Equipment Division for 2011.
(b) Assume the division is an investment center, and average operating assets were $1,000,000.
Compute ROI.
Solution
Budgeted Actual Sales 900000 870000 Cost of goods sold   Variable 440000 405000  Â
Fixed 100000 105000 Selling and administrative   Variable 60000 62000    Fixed
90000 78000 Noncontrollable fixed 70000 80000 Responsibility Report Budgeted Actual
2. Difference Favorable or Unfavorable Sales 900000 870000 30000 U Variable Costs 500000
467000 33000 U Contribution margin 400000 403000 3000 F Controllable fixed costs 190000
183000 7000 F Controllable margin 210000 220000 10000 F Return on investment 21.00%
22.00%
