Question

For the year ending December 31, 2020, Sunland Company accumulates the following data for the Plastics Division which it operates as an investment center: contribution margin—$787,420 budget, $803,988 actual; controllable fixed costs—$300,700 budget, $305,100 actual. Average operating assets for the year were $2,028,000.

Prepare a responsibility report for the Plastics Division beginning with contribution margin for the year ending December 31, 2020. (Round ROI to 1 decimal place, e.g. 1.5%.)

SUNLAND COMPANY Plastics Division Responsibility Report For the Year Ended December 31, 2020
								Difference
		Budget			Actual			Favorable Unfavorable Neither Favorable nor Unfavorable
Return on InvestmentControllable MarginVariable CostsContribution MarginFixed CostsControllable Fixed CostsGross ProfitNet Income/(Loss)		$			$			$		FavorableUnfavorableNeither Favorable nor Unfavorable
Gross ProfitControllable Fixed CostsReturn on InvestmentControllable MarginNet Income/(Loss)Fixed CostsVariable CostsContribution Margin										FavorableUnfavorableNeither Favorable nor Unfavorable
Contribution MarginNet Income/(Loss)Variable CostsControllable Fixed CostsControllable MarginFixed CostsReturn on InvestmentGross Profit		$			$			$		FavorableUnfavorableNeither Favorable nor Unfavorable
Controllable MarginNet Income/(Loss)Variable CostsControllable Fixed CostsFixed CostsGross ProfitContribution MarginReturn on Investment			%			%			%	FavorableUnfavorableNeither Favorable nor Unfavorable

Answer 1

Ans.	SUNLAND   COMPANY
	Plastic Division
	Responsibility Report
	For the Year Ended December 31, 2020
		Budget	Actual	Diffference (Fav/ Unf/ None)
	Contribution margin	$787,420	$803,988	$16,568	Favorable
	Controllable fixed costs	$300,700	$305,100	$4,400	Unfavorable
	Controllable margin	$486,720	$498,888	$12,168	Favorable
	Return on investment	24.0%	24.6%	0.6%	Favorable
	*Increase in contribution margin and controllable margin from budget to actual = favorable.
	*Decrease in contribution margin and controllable margin from budget to actual = Unfavorable.
	*Increase in fixed cost from budget to actual is unfavorable.
	*Decrease in fixed cost from budget to actual is favorable.
	*Return on investment = Controllable margin / Average operating assets * 100
	Budget	$486,720 / $2,028,000 * 100
	Actual	$498,888 / $2,028,000 * 100