List some facts that recently have occurred at Waltham Motors. A
nalyze the report that was presented by the accountant. Do you agree with his conclusions and recommendations?
How can the cost control process be improved?
Prepare a flexible budget and estimate the line by line variances. How does this result compare with the report presented in question #2. P
repare a comprehensive variance analysis. How do you dispose of the variances for the variable and fixed costs? How is the report from question 5 useful to improve the cost control systems of the firm.
Waltham Motors Division When Sharon Michaels arrived at her office at Waltham Motors Division on June 4, 2004, she was pleased to find the monthly performance report for May on her desk. Her job as division controller was to analyze results of operations each month and to prepare a narrative report on operations that was to be forwarded to the corporate headquarters of Marco Corporation. Waltham Motors was a wholly owned subsidiary of Marco. The atmosphere at the division had been one of apprehensiveness throughout the month of May, and today would provide a chance to find out how well division management had compensated for the recent loss of a major customer contract. The Current Situation Waltham Motors manufactured electric motors of a single design that were sold to household appliance manufacturers. Originally a family-owned business, the division had been acquired in late 2003 by the Marco Corporation. Few changes had been made in either the company's operating procedures or systems because Marco's management had chosen to delay changing procedures a systems until it was able to observe how well those already in use at Waltham functioned. In April, Sharon Michaels, who had earned a master's degree in business administration in 2002, was transferred from the corporate headquarters controller's office to Waltham Motors. She was joined in late May by David Marshall, also from Marco, who was to be the new division manager nd Because of the lost contract, Michaels had asked the plant accountant to assemble the May figures as quickly as possible, but she was amazed that they were ready so soon. At headquarters, monthly results had rarely been available until several days after the end of each month. Even though the plant accountant had promised Sharon that he would be able to prepare the report in a single day with some overtime work, she was surprised that he had been able to do so. The division had prepared a budget for 2004 based on estimated sales and production costs. Because sales were not subject to seasonal fluctuations, the monthly budget was merely one-twelfth of the annual budget. No adjustments had been made to the May budget when the contract was lost in April. Waltham Motors Division When Sharon Michaels arrived at her office at Waltham Motors Division on June 4, 2004, she was pleased to find the monthly performance report for May on her desk. Her job as division controller was to analyze results of operations each month and to prepare a narrative report on operations that was to be forwarded to the corporate headquarters of Marco Corporation. Waltham Motors was a wholly owned subsidiary of Marco. The atmosphere at the division had been one of apprehensiveness throughout the month of May, and today would provide a chance to find out how well division management had compensated for the recent loss of a major customer contract. The Current Situation Waltham Motors manufactured electric motors of a single design that were sold to household appliance manufacturers. Originally a family-owned business, the division had been acquired in late 2003 by the Marco Corporation. Few changes had been made in either the company's operating procedures or systems because Marco's management had chosen to delay changing procedures a systems until it was able to observe how well those already in use at Waltham functioned. In April, Sharon Michaels, who had earned a master's degree in business administration in 2002, was transferred from the corporate headquarters controller's office to Waltham Motors. She was joined in late May by David Marshall, also from Marco, who was to be the new division manager nd Because of the lost contract, Michaels had asked the plant accountant to assemble the May figures as quickly as possible, but she was amazed that they were ready so soon. At headquarters, monthly results had rarely been available until several days after the end of each month. Even though the plant accountant had promised Sharon that he would be able to prepare the report in a single day with some overtime work, she was surprised that he had been able to do so. The division had prepared a budget for 2004 based on estimated sales and production costs. Because sales were not subject to seasonal fluctuations, the monthly budget was merely one-twelfth of the annual budget. No adjustments had been made to the May budget when the contract was lost in April
