Chudzik Manufacturing Company makes garden and lawn equipment. The company operates through three divisions. Each division is
Question:
Chudzik 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, 2016, and relevant budget data are as follows:
Average operating assets for the year for the lawn mower division were $5 million, which was also the budgeted amount.
Instructions
(a) Prepare a responsibility report (in thousands of dollars) for the lawnmower division.
(b) Evaluate the manager's performance. Which items will likely be investigated by top management?
(c) Calculate the expected ROI in 2016 for the lawn mower division, assuming the following independent changes:
1. The variable cost of goods sold decreases by 20%.
2. Theaverageoperatingassetsdecreaseby24%.
3. Sales increase by $700,000 and this increase is expected to increase the contribution margin by $260,000.
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
Step by Step Answer:
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118856994
4th Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly