Question
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
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-hour |
| 25,000 | 30,000 | ||||||||||||||||||
Variable costs: | |||||||||||||||||||||
Supplies | $ | 6,000 | $ | 6,600 | $ | 600 | F | ||||||||||||||
Scrap | 16,800 | 18,000 | 1,200 | F | |||||||||||||||||
Indirect materials | 54,200 | 61,500 | 7,300 | F | |||||||||||||||||
Fixed costs: | |||||||||||||||||||||
Wages and salaries | 64,300 | 62,000 | 2,300 | U | |||||||||||||||||
Equipment depreciation | 92,000 | 92,000 | |||||||||||||||||||
Total cost | $ | 233,300 | $ | 240,100 | $ | 6,800 | F | ||||||||||||||
|
|
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. (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) | 25,000 | 30,000 | ||||||||||||
Supplies | $6,000 | $6,600 | ||||||||||||
Scrap | 16,800 | 18,000 | ||||||||||||
Indirect materials | 54,200 | 61,500 | ||||||||||||
Wages and salaries | 64,300 | 62,000 | ||||||||||||
Equipment depreciation | 92,000 | 92,000 |
4. | Were costs well controlled in March? | ||||
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started