Question
Walmart. uses budgets in an effort to control costs. The June 2016 budget report for the companys manufacturing operations is as follows: Walmart Budget Report
Walmart. uses budgets in an effort to control costs. The June 2016 budget report for the companys manufacturing operations is as follows:
Walmart
Budget Report
Manufacturing Operations
For the Month Ended June 30, 2016
Manufacturing Costs |
Budget |
Actual |
Difference | Favorable (F) Unfavorable (U) |
Variable costs |
|
|
|
|
Direct materials | $ 96,000 | $ 94,000 | $ 2,000 | F |
Direct labor | 108,000 | 102,000 | 6,000 | F |
Indirect materials | 48,000 | 49,000 | 1,000 | U |
Indirect labor | 36,000 | 38,000 | 2,000 | U |
Repairs | 12,000 | 13,000 | 1,000 | U |
Utilities | 30,000 | 28,000 | 2,000 | F |
Total variable costs | 330,000 | 324,000 | 6,000 | F |
Fixed costs |
|
|
|
|
Rent | 24,000 | 24,000 | 0 |
|
Supervisor salary | 34,000 | 34,000 | 0 |
|
Depreciation | 12,000 | 12,000 | 0 |
|
Total fixed costs | 70,000 | 70,000 | 0 |
|
Total costs | 400,000 | 394,000 | 6,000 | F |
The monthly budget was based on production of 120,000 units per month (1,440,000 units per year). The manufacturing manager is proud of the fact that the report reflected a favorable variance and expects that he will be rewarded for spending less than budget. The controller of the company was not happy with the June results because there were only 115,000 units produced.
Prepare a performance report for June that includes a flexible budget.
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