Taegu Ltd. 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.

Average operating assets for the year for the Home Division were W2,000,000,000 which was also the budgeted amount.

Instructions

a. Prepare a responsibility report (in millions of won) for the Home Division. 

b. Evaluate the manager’s performance. Which items will likely be investigated by top management?

c. Compute the expected ROI in 2020 for the Home Division, assuming the following independent changes to actual data.

1. Variable cost of goods sold is decreased by 5%.

2. Average operating assets are decreased by 10%.

3. Sales are increased by W200,000,000, and this increase is expected to increase contribution margin by W80,000,000.

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Actual Comparison with Budget W1,400,000,000 Sales W100,000,000 favorable Variable cost of goods sold Variable selling and administrative expenses Controllable fixed cost of goods sold Controllable fixed selling and administrative 665,000,000 45,000,000 unfavorable 125,000,000 170,000,000 25,000,000 unfavorable On target On target 80,000,000 expenses