Question

KMC 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, 2020, and relevant budget data are as follows:


Actual
Comparison with Budget
Sales
$2,900,000
$150,000
unfavourable
Variable cost of goods sold
1,400,000
100,000
unfavourable
Variable selling and administrative expenses
300,000


40,000


favourable


Controllable fixed cost of goods sold
270,000

 


On target


Controllable fixed selling and administrative expenses
140,000

 


On target

 

Average operating assets for the year for the lawn mower division were $5
million, which was also the budgeted amount.
Required:
Prepare a responsibility report (in thousands of dollars) for the lawn
mower division.
Calculate the expected ROI in 2020 for the KMC division, assuming the following independent changes:
The variable cost of goods sold decreases by 20%.
The average operating assets decrease by 24%.

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