1. Using the Planning Budget data, what are Rustx's break-even units? ( 5 pts). What does that tell you about the month of May's financial results? (5 pts) 2. Using the Planning Budget data, what was the total expeeted cost per unit if all manufacturing and shipping overhead was allocated to production?(10 pts) 3. Calculate the Actual unit cost. How does that compare with the Planning Budget? (10 pts) 4. Comment on Bart's Performance Report. Do you think it should be submitted as is, or revised? (10 pts) 5. Prepare your own Monthly Performance Report in Excel, using the textbook format from Exhibit 98 (50 pts) 6. What is the Total Revenue and Spending Variance? (5 pts) What is the Total Activity Variance? (5 pts) Be sure to indicate whether they are favorable or unfavorable. Rusty Motors Case When Christina Jacobs arrived at her office at Rusty Motors on June 3, she was pleased to find the monthly performance report on her desk. Christina's job as division controller was to analyze results of operations each month and to prepare a narrative report on monthly results which she would send to McCadden Enterprises, Rustx's parent company. Rusty Motors was a wholly | owned subsidiary of McCadden. The atmosphere at Rusty had been anxious throughout the month of May. Today would provide the opportunity to find out how well Rustx's management had responded to the recent loss of a major customer contract. Rusty Motors manufactured small electric motors which were sold to household appliance manufacturers. What started as a small, family-owned business had grown to become a major player in the industry. It was at this point that McCadden came in with an offer that the Rusty family could not refuse. After the sale of Rusty closed, few changes had been made by McCadden in either processes or staff, as they wanted to see how well the business functioned before making any changes. Three months after the sale, Christina Jacobs, who had earned her B.S. in Accounting from Francis University, transferred from McCadden's headquarters controller's office to Rusty Motors. She was joined soon after by Savannah Tumer, also from McCadden, to be the new general manager at Rusty. Disaster struck soon after. A major appliance maker, and long-time Rusty customer, had cancelled their contract at the end of April and moved production to Southeast Asia. Because of the lost contract, and the potential negative financial impact, Christina had asked the plant chief accountant, Bart Christopher, to prepare the monthly performance report for May as soon as possible. She was amazed that the report had been prepared so quickly. Back at headquarters it had taken at least a week to receive the monthly reports. Even though Bart had promised that he could prepare the report in a single day with some overtime, she was surprised that he had done so. Rusty had prepared their planning budget for 202x based on estimated sales and production expenses. Because sales were not seasonal, the monthly budget was simply 1/12 of the annual planning budget. No adjustments had been made to the planning budget when the contract had been lost in April. A glance at the monthly performance report for May confirmed Christina's worst fears. Instead of the budgeted operating profit of $91,200, Rusty had lost $7,200 in May. Even with the impact of the lost contract, Christina had expected a better result. The original performance report is shown in the Excel file that accompanies this case. The following is a reproduction of Bart's memo to Christina that was attached to the report: 06/02/202x 11:30pm To: Christina Jacobs From: Bart Christopher Subject: May 202x Monthly Performance Report As promised, here is the performance report for May. I'm sure you will find the bottom line disappointing, but plant performance is excellent! Note that the plant is favorable against budget for every cost category except supervision, and supervision is higher only because the other costs were controlled! Because I worked late, I'm taking tomorrow off. I have a 9:00am tee time, so I will not be available for any phone calls or questions. Here is the additional data you requested: 1. Budgeted costs per unit are $6 for Direct Material and $16 for Direct Labor, $4.89 for Other Variable Mfg. Costs and $1.60 for Variable Shipping costs. 2. Actual selling price per unit is $49 versus planning budget of $48. \begin{tabular}{|c|c|c|c|} \hline Osiek Motors & & & \\ \hline Monthly Performance Rep & & & \\ \hline For the Manth of May, 20 & Planning & & \\ \hline & Budget & Actual & Variance \\ \hline Units & 18,000 & 14,000 & (4,000) \\ \hline Sales & $864,000 & $686,000 & $(178,000) \\ \hline Variable Mfg Costs: & & & \\ \hline Direct Material & $108,000 & $85,400 & 22,600 \\ \hline Direct Labor & $288,000 & $246,000 & 42,000 \\ \hline Other Variable Mff & $88,000 & $72,600 & 15,400 \\ \hline Total Var Mfg Costs & $484,000 & $404,000 & 80,000 \\ \hline Variable Shipping Costs: & & & \\ \hline Total Var Ship Costs & $28,800 & $28,000 & 800 \\ \hline & & & - \\ \hline Total Variable Costs & $12,800 & $432,000 & 80,800 \\ \hline Contribution Margin & $351,200 & $254,000 & $(97,200) \\ \hline Total Fored Costs & $260,000 & $261,200 & (1,200) \\ \hline Operating Income(Loss) & $91,200 & $(7,200) & $(98,400) \\ \hline \end{tabular} 1. Using the Planning Budget data, what are Rustx's break-even units? ( 5 pts). What does that tell you about the month of May's financial results? (5 pts) 2. Using the Planning Budget data, what was the total expeeted cost per unit if all manufacturing and shipping overhead was allocated to production?(10 pts) 3. Calculate the Actual unit cost. How does that compare with the Planning Budget? (10 pts) 4. Comment on Bart's Performance Report. Do you think it should be submitted as is, or revised? (10 pts) 5. Prepare your own Monthly Performance Report in Excel, using the textbook format from Exhibit 98 (50 pts) 6. What is the Total Revenue and Spending Variance? (5 pts) What is the Total Activity Variance? (5 pts) Be sure to indicate whether they are favorable or unfavorable. Rusty Motors Case When Christina Jacobs arrived at her office at Rusty Motors on June 3, she was pleased to find the monthly performance report on her desk. Christina's job as division controller was to analyze results of operations each month and to prepare a narrative report on monthly results which she would send to McCadden Enterprises, Rustx's parent company. Rusty Motors was a wholly | owned subsidiary of McCadden. The atmosphere at Rusty had been anxious throughout the month of May. Today would provide the opportunity to find out how well Rustx's management had responded to the recent loss of a major customer contract. Rusty Motors manufactured small electric motors which were sold to household appliance manufacturers. What started as a small, family-owned business had grown to become a major player in the industry. It was at this point that McCadden came in with an offer that the Rusty family could not refuse. After the sale of Rusty closed, few changes had been made by McCadden in either processes or staff, as they wanted to see how well the business functioned before making any changes. Three months after the sale, Christina Jacobs, who had earned her B.S. in Accounting from Francis University, transferred from McCadden's headquarters controller's office to Rusty Motors. She was joined soon after by Savannah Tumer, also from McCadden, to be the new general manager at Rusty. Disaster struck soon after. A major appliance maker, and long-time Rusty customer, had cancelled their contract at the end of April and moved production to Southeast Asia. Because of the lost contract, and the potential negative financial impact, Christina had asked the plant chief accountant, Bart Christopher, to prepare the monthly performance report for May as soon as possible. She was amazed that the report had been prepared so quickly. Back at headquarters it had taken at least a week to receive the monthly reports. Even though Bart had promised that he could prepare the report in a single day with some overtime, she was surprised that he had done so. Rusty had prepared their planning budget for 202x based on estimated sales and production expenses. Because sales were not seasonal, the monthly budget was simply 1/12 of the annual planning budget. No adjustments had been made to the planning budget when the contract had been lost in April. A glance at the monthly performance report for May confirmed Christina's worst fears. Instead of the budgeted operating profit of $91,200, Rusty had lost $7,200 in May. Even with the impact of the lost contract, Christina had expected a better result. The original performance report is shown in the Excel file that accompanies this case. The following is a reproduction of Bart's memo to Christina that was attached to the report: 06/02/202x 11:30pm To: Christina Jacobs From: Bart Christopher Subject: May 202x Monthly Performance Report As promised, here is the performance report for May. I'm sure you will find the bottom line disappointing, but plant performance is excellent! Note that the plant is favorable against budget for every cost category except supervision, and supervision is higher only because the other costs were controlled! Because I worked late, I'm taking tomorrow off. I have a 9:00am tee time, so I will not be available for any phone calls or questions. Here is the additional data you requested: 1. Budgeted costs per unit are $6 for Direct Material and $16 for Direct Labor, $4.89 for Other Variable Mfg. Costs and $1.60 for Variable Shipping costs. 2. Actual selling price per unit is $49 versus planning budget of $48. \begin{tabular}{|c|c|c|c|} \hline Osiek Motors & & & \\ \hline Monthly Performance Rep & & & \\ \hline For the Manth of May, 20 & Planning & & \\ \hline & Budget & Actual & Variance \\ \hline Units & 18,000 & 14,000 & (4,000) \\ \hline Sales & $864,000 & $686,000 & $(178,000) \\ \hline Variable Mfg Costs: & & & \\ \hline Direct Material & $108,000 & $85,400 & 22,600 \\ \hline Direct Labor & $288,000 & $246,000 & 42,000 \\ \hline Other Variable Mff & $88,000 & $72,600 & 15,400 \\ \hline Total Var Mfg Costs & $484,000 & $404,000 & 80,000 \\ \hline Variable Shipping Costs: & & & \\ \hline Total Var Ship Costs & $28,800 & $28,000 & 800 \\ \hline & & & - \\ \hline Total Variable Costs & $12,800 & $432,000 & 80,800 \\ \hline Contribution Margin & $351,200 & $254,000 & $(97,200) \\ \hline Total Fored Costs & $260,000 & $261,200 & (1,200) \\ \hline Operating Income(Loss) & $91,200 & $(7,200) & $(98,400) \\ \hline \end{tabular}