| Problem 9-23 Critiquing a Variance Report; Preparing a Performance Report [LO1, LO4, LO6] | Several years ago, Shipley Corporation developed a comprehensive budgeting system for profit planning and control purposes. While departmental supervisors have been happy with the system, the factory manager has expressed considerable dissatisfaction with the information being generated by the system. | | A typical departmental cost report for a recent period follows: | | Assembly Department Cost Report For the Month Ended March 31 | | | Planning Budget | Actual Results | Variances | | Machine-hours | | 32,000 | | 27,000 | | | | | Variable costs: | | | | | | | | | Supplies | $ | 9,600 | $ | 9,000 | $ | 600 | F | | Scrap | | 12,800 | | 11,800 | | 1,000 | F | | Indirect materials | | 54,400 | | 48,900 | | 5,500 | F | | Fixed costs: | | | | | | | | | Wages and salaries | | 50,000 | | 51,900 | | 1,900 | U | | Equipment depreciation | | 88,000 | | 88,000 | | | | | | | | | | | | | | Total cost | $ | 214,800 | $ | 209,600 | $ | 5,200 | F | | | | | | | | | | | | | After receiving a copy of this cost report, the supervisor of the Assembly Department stated, These reports are super. It makes me feel really good to see how well things are going in my department. I cant understand why those people upstairs complain so much about the reports. | | | | For the last several years, the companys marketing department has chronically failed to meet the sales goals expressed in the companys monthly budgets. | | 1. | The companys president is uneasy about the cost reports, what can be the reason? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) | | | | | | | | Cost reports are effective as budgeted costs at one level of activity is compared to actual costs at another level of activity | | | Cost reports shows whether fixed costs and variable costs are controlled | | | Cost reports shows whether fixed costs are controlled and do not show whether variable costs are controlled | | | Cost reports are ineffective as budgeted costs at one level of activity is compared to actual costs at another level of activity | | | 2. | What kind of reports should be used to give better insight into how well departmental supervisors are controlling costs? | | | | | | | | Fixed budget performance reports must be used | | | Flexible budget performance reports must be used | | | 3. | Complete a new performance report for the quarter, based on answer to (2) above. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount. Omit the "$" sign in your response.) | | Assembly Department Performance Report For the Month Ended March 31 | | | Activity Variances | Budget | Revenue and Spending Variances | | Machine-hours | | | | | | | Supplies | $ | (Click to select)UFNone | $ | $ | (Click to select)UNoneF | | Scrap | | (Click to select)UFNone | | | (Click to select)UNoneF | | Indirect materials | | (Click to select)FUNone | | | (Click to select)NoneUF | | Wages and salaries | | (Click to select)UFNone | | | (Click to select)FUNone | | Equipment depreciation | | (Click to select)UNoneF | | | (Click to select)FNoneU | | | | | | | | | Total | $ | (Click to select)UNoneF | $ | $ | (Click to select)UFNone | | | | | | | | | | |
