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?