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 report for the company's Assembly Department for the month of March follows:

Assembly Department Cost Report For the Month Ended March 31
	Actual Results		Planning Budget		Variances
Machine-hours		35,000		40,000
Variable costs:
Supplies	$	29,700	$	32,000	$	2,300	F
Scrap		19,500		20,000		500	F
Indirect materials		51,800		56,000		4,200	F
Fixed costs:
Wages and salaries		79,200		80,000		800	F
Equipment depreciation		60,000		60,000
Total cost	$	240,200	$	248,000	$	7,800	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, identify at least two reasons.

2. What kind of reports should be used to give better insight into how well departmental supervisors are controlling costs?

3. Complete the new performance report for the quarter, based on Flexible Budget Performance approach.

4. Were costs well controlled in March?

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.

choose one:

	Flexible budget performance reports must be usedradio button unchecked1 of 2 Fixed budget performance reports must be usedradio button unchecked2 of 2

Westmont Corporation
Assembly Department
Flexible Budget Performance Report
For the Month Ended March 31
	Actual Results			Flexible Budget			Planning Budget
Machine-hours (q)	35,000						40,000
Supplies	$29,700						$32,000
Scrap	19,500						20,000
Indirect materials	51,800						56,000
Wages and salaries	79,200						80,000
Equipment depreciation	60,000						60,000
Total	$240,200			$0			$248,000

choose one:

Costs were well controlledradio button unchecked

Costs were not well controlledradio button unchecked