Problem 10-6A (Part Level Submission) (Video)

Durham Company uses a responsibility reporting system. It has divisions in Denver, Seattle, and San Diego. Each division has three production departments: Cutting, Shaping, and Finishing. The responsibility for each department rests with a manager who reports to the division production manager. Each division manager reports to the vice president of production. There are also vice presidents for marketing and finance. All vice presidents report to the president. In January 2020, controllable actual and budget manufacturing overhead cost data for the departments and divisions were as shown below.

Manufacturing Overhead		Actual		Budget
Individual costsCutting DepartmentSeattle
Indirect labor		$73,100		$70,000
Indirect materials		48,000		45,900
Maintenance		20,500		17,800
Utilities		19,900		17,000
Supervision		22,100		19,900
		$183,600		$170,600

Total costs
Shaping DepartmentSeattle		$157,700		$148,100
Finishing DepartmentSeattle		211,200		203,600
Denver division		677,600		673,300
San Diego division		721,500		715,400

Additional overhead costs were incurred as follows: Seattle division production manageractual costs $52,200, budget $51,500; vice president of productionactual costs $65,500, budget $63,700; presidentactual costs $76,400, budget $74,300. These expenses are not allocated. The vice presidents who report to the president, other than the vice president of production, had the following expenses.

Vice President		Actual		Budget
Marketing		$133,300		$130,000
Finance		108,600		104,600

(a)

	Your answer is correct.

Prepare the Manufacturing overheadCutting Department managerSeattle division responsibility report.

To Cutting Department ManagerSeattle Division							Month: January
Controllable Costs:		Budget		Actual		Favorable Unfavorable Neither Favorable nor Unfavorable
Direct LaborDirect MaterialsIndirect LaborIndirect MaterialsMaintenancePresidentSeattle Division Production ManagerSupervisionUtilitiesVice President of ProductionCuttingShapingFinishingSeattleDenverSan DiegoPrductionMarketingFinance		$		$		$	UnfavorableNeither Favorable nor UnfavorableFavorable
Direct LaborDirect MaterialsIndirect LaborIndirect MaterialsMaintenancePresidentSeattle Division Production ManagerSupervisionUtilitiesVice President of ProductionCuttingShapingFinishingSeattleDenverSan DiegoPrductionMarketingFinance							UnfavorableFavorableNeither Favorable nor Unfavorable
Direct LaborDirect MaterialsIndirect LaborIndirect MaterialsMaintenancePresidentSeattle Division Production ManagerSupervisionUtilitiesVice President of ProductionCuttingShapingFinishingSeattleDenverSan DiegoPrductionMarketingFinance							UnfavorableNeither Favorable nor UnfavorableFavorable
Direct LaborDirect MaterialsIndirect LaborIndirect MaterialsMaintenancePresidentSeattle Division Production ManagerSupervisionUtilitiesVice President of ProductionCuttingShapingFinishingSeattleDenverSan DiegoPrductionMarketingFinance							UnfavorableNeither Favorable nor UnfavorableFavorable
Direct LaborDirect MaterialsIndirect LaborIndirect MaterialsMaintenancePresidentSeattle Division Production ManagerSupervisionUtilitiesVice President of ProductionCuttingShapingFinishingSeattleDenverSan DiegoPrductionMarketingFinance							FavorableUnfavorableNeither Favorable nor Unfavorable
Total		$		$		$	UnfavorableNeither Favorable nor UnfavorableFavorable

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(b) Prepare the Manufacturing overheadSeattle division manager responsibility report.