Question

The Sports Equipment Division of Harrington Company is operated as a profit center. Sales for the division were budgeted for 2020 at $905,000. The only variable costs budgeted for the division were cost of goods sold ($441,000) and selling and administrative ($63,000). Fixed costs were budgeted at $101,000 for cost of goods sold, $94,000 for selling and administrative, and $75,000 for noncontrollable fixed costs. Actual results for these items were:

Sales		$884,000
Cost of goods sold
Variable		415,000
Fixed		107,000
Selling and administrative
Variable		61,000
Fixed		73,000
Noncontrollable fixed		95,000

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct.

Prepare a responsibility report for the Sports Equipment Division for 2020. (List variable costs before fixed costs.)

HARRINGTON COMPANY Sports Equipment Division Responsibility Report For the Year Ended December 31, 2020
	Budget		Actual		Difference
					Favorable Unfavorable Neither Favorable nor Unfavorable
Controllable Fixed CostsContribution MarginCost of Goods SoldGross ProfitTotal Variable CostsTotal Controllable Fixed CostsTotal Noncontrollable Fixed CostsControllable MarginVariable CostsNoncontrollable Fixed CostsSalesSelling and Administrative	$		$		$	FavorableNeither Favorable nor UnfavorableUnfavorable
Selling and AdministrativeTotal Noncontrollable Fixed CostsCost of Goods SoldSalesVariable CostsControllable MarginTotal Variable CostsGross ProfitNoncontrollable Fixed CostsTotal Controllable Fixed CostsControllable Fixed CostsContribution Margin
Total Controllable Fixed CostsGross ProfitCost of Goods SoldTotal Variable CostsControllable Fixed CostsNoncontrollable Fixed CostsVariable CostsSelling and AdministrativeContribution MarginTotal Noncontrollable Fixed CostsSalesControllable Margin						FavorableNeither Favorable nor UnfavorableUnfavorable
Noncontrollable Fixed CostsContribution MarginSelling and AdministrativeControllable MarginGross ProfitVariable CostsSalesTotal Controllable Fixed CostsCost of Goods SoldControllable Fixed CostsTotal Noncontrollable Fixed CostsTotal Variable Costs						UnfavorableFavorableNeither Favorable nor Unfavorable
Controllable MarginTotal Noncontrollable Fixed CostsCost of Goods SoldTotal Controllable Fixed CostsTotal Variable CostsContribution MarginSelling and AdministrativeGross ProfitNoncontrollable Fixed CostsControllable Fixed CostsSalesVariable Costs						UnfavorableFavorableNeither Favorable nor Unfavorable
Cost of Goods SoldGross ProfitSelling and AdministrativeNoncontrollable Fixed CostsTotal Variable CostsTotal Controllable Fixed CostsContribution MarginControllable Fixed CostsVariable CostsTotal Noncontrollable Fixed CostsSalesControllable Margin						UnfavorableNeither Favorable nor UnfavorableFavorable
Total Variable CostsSelling and AdministrativeContribution MarginGross ProfitTotal Controllable Fixed CostsTotal Noncontrollable Fixed CostsSalesCost of Goods SoldControllable Fixed CostsNoncontrollable Fixed CostsVariable CostsControllable Margin
Selling and AdministrativeGross ProfitNoncontrollable Fixed CostsControllable MarginControllable Fixed CostsTotal Variable CostsContribution MarginSalesTotal Noncontrollable Fixed CostsTotal Controllable Fixed CostsCost of Goods SoldVariable Costs						UnfavorableFavorableNeither Favorable nor Unfavorable
Total Noncontrollable Fixed CostsNoncontrollable Fixed CostsControllable MarginSelling and AdministrativeControllable Fixed CostsTotal Controllable Fixed CostsSalesTotal Variable CostsGross ProfitCost of Goods SoldVariable CostsContribution Margin						FavorableUnfavorableNeither Favorable nor Unfavorable
Total Variable CostsNoncontrollable Fixed CostsCost of Goods SoldControllable Fixed CostsContribution MarginTotal Controllable Fixed CostsSalesControllable MarginTotal Noncontrollable Fixed CostsGross ProfitSelling and AdministrativeVariable Costs						FavorableNeither Favorable nor UnfavorableUnfavorable
Contribution MarginControllable MarginSelling and AdministrativeSalesCost of Goods SoldTotal Noncontrollable Fixed CostsNoncontrollable Fixed CostsTotal Controllable Fixed CostsTotal Variable CostsControllable Fixed CostsVariable CostsGross Profit	$		$		$	FavorableNeither Favorable nor UnfavorableUnfavorable

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Assume the division is an investment center, and average operating assets were $1,000,000. The noncontrollable fixed costs are controllable at the investment center level. Compute ROI using the actual amounts. (Round ROI to 1 decimal place, e.g. 1.5.)

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Answer 1

HARRINGTON COMPANY
Sports Equipment Division
Responsibility Report
2020
		Amount	Working
	BUDGET	ACTUAL	Difference
Sales	905,000	884,000	(21,000)	U
Variable costs
Cost of goods sold	441,000	415,000	26,000	F
Selling and administrative	63,000	61,000	2,000	F
Total	504,000	476,000	28,000	F
Contribution margin	401,000	408,000	7,000	F
Controllable fixed costs
Cost of goods sold	101,000	107,000	(6,000)	U
Selling and administrative	94,000	73,000	21,000	F
Total	195,000	180,000	15,000	F
Controllable margin	206,000	228,000	22,000	F

CALCULATE ROI IF DIVISION IS INVESTMENT DIVISION :

CONTROLLABLE MARGIN IN INVESTMENT DIVISION	228,000
LESS: CONTROLLABLE FIXED COST	(95,000)
CONTROLLABLE MARGIN IN PROFIT DIVISION	133,000
AVERAGE OPERATING ASSETS	1,000,000
ROI (133,000*100/1,000,000)	13.3%

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