Part 1 For the year ended December 31, 2013, Xander Company reports the following: Sales $3,000,000 Variable costs 2,000,000 Controllable fixed costs 900,000 Average operating assets 2,100,000 Required: Compute ROI for each of the following situations. Show all computations. 1. Compute ROI for the year ended December 31, 2013. 2. For 2014 Xander is considering switching to a more automated production process. Controllable fixed costs would increase $100,000 and average-operating assets would increase $50,000. Due to increased automation, the Variable costs are expected to drop 6%. Sales are expected to increase 2%. Compute ROI under the new proposal. 3. Should Xander make the proposed changes? Why or why not? Part 2 Tang Company had the following budgeted and actual amounts are for 2013: Cost Budget at 625 units Actual Amounts at 725 units Direct materials $13,233 $16,375 Direct labor 17,500 20,250 Fixed overhead 8,750 8,625 Instructions 1. Prepare a performance report for Tang Company for the year. 2. What does the report indicate about the production manager?s control of costs?
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