Several years ago Shipley Corporation developed a comprhensive 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 mont Ended March 31

		planning budget	actual results	variances
machine hours		30,000	25,000
variable cost
supplies		6,000	5400	600 F
scrap		15,000	14,000	1000 F
indirect materials		52,500	47,000	5,550 F
FIXED COSTS
wages/salaries		60,000	61900	1900 U
equipment depreciation		90,000	90,000	0
total cost		223,500	218,300	5200 F

After receiving a cop 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 te company's marketing department has chronically failed to mee the sales goals expressed in the company's monthly budgets.

REQUIRED:

1. The company's president is uneasy about the cost reports and would like you to evaluate their usefulness to the company.

2. What changes, if any, should be made in the reports to five better insight into how well deparment supervisors are controlling costs?

3. Prepare a new performance report for the quarter, incorporating any changes you suggested in question 2 (above)

4. How well were cost controlled in the Assembly Department in March