Problem 9-24 Critiquing a Variance Report; Preparing a Performance Report [LO9-1, LO9-4, LO9-6] Several years ago, Westmont Corporation developed a comprehensive budgeting system for 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 Actual Results Planning Budget Variances Machine-hours 15,000 20,000 Variable costs: Supplies $ 9,600 $ 10,200 $ 600 F Scrap 33,600 36,000 2,400 F Indirect materials 97,400 115,500 18,100 F Fixed costs: Wages and salaries 78,700 74,000 4,700 U Equipment depreciation 104,000 104,000 Total cost $ 323,300 $ 339,700 $ 16,400 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. Required: 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 ineffective since budgeted costs at one level of activity are compared to actual costs at another level of activity. Cost reports show whether fixed costs are controlled and do not show whether variable costs are controlled. Cost reports are effective since budgeted costs at one level of activity are compared to actual costs at another level of activity. Cost reports show whether fixed costs and variable costs are controlled. 2. What kind of reports should be used to give better insight into how well departmental supervisors are controlling costs? Flexible budget performance reports must be used Fixed budget performance reports must be used 3. Complete the new performance report for the quarter, based on Flexible Budget Performance approach. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Westmont Corporation
Assembly Department
Flexible Budget Performance Report
For the Month Ended March 31
	Actual Results	Spending Variances		Flexible Budget	Activity Variances		Planning Budget
Machine-hours (q)	15,000						20,000
Supplies	$9,600						$10,200
Scrap	33,600						36,000
Indirect materials	97,400						115,500
Wages and salaries	78,700						74,000
Equipment depreciation	104,000						104,000
Total	$323,300			$0			$339,700