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: ActualComparison with BudgetSales$2,900,000$150,000unfavourableVariable cost of goods sold1,400,000100,000unfavourableVariable selling and administrative expenses300,000 40,000 favourable Controllable fixed cost of goods sold270,000 On target Controllable fixed selling and administrative expenses140,000 On target Average operating assets for the year for the lawn mower division were $5million, which was also the budgeted amount.Required:Prepare a responsibility report (in thousands of dollars) for the lawnmower 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%.

1) Preparation of responsibility budget for the Lawn mower division Actual Budget…

Answered: KMC Manufacturing Company makes garden…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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:
1. The variable cost of goods sold decreases by 20%.
2. The average operating assets decrease by 24%.

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