Wood Art Pte Ltd ("Wood Art") is a manufacturer of furniture and has an annual sales of $12 million. It has four major products: bookcases, magazine racks, end tables and bar stools. Production is spread evenly over the year. Each product is managed by a production manager.

Wood Art uses a standard-costing system and applies variable overhead on the basis of machine hours. Fixed production cost is allocated on the basis of square footage occupied using a predetermined plant-wide rate; the size of the space occupied varies considerably among the product lines. All other costs are assigned on the basis of revenue dollars earned. At the monthly meeting to review April performance, Tommy Tan, manager of the bookcase line, receive the following report.

Wood Art

Bookcase Production Performance Report for the Month of April

	Actual	Budget	Variance
Units	3000	2500	500 F
	$	$	$
Revenue	150,000	135,000	15,000 F
Variable product cost:
Direct Material	23,100	20,000	3,100 U
Direct labour	18,300	15,000	3,300 U
Machine overhead	41,00	35,000	6,000 U
Fixed production costs:
Indirect labour	9,400	6,000	3,400 U
Depreciation	5,500	5,500	--
Property taxes and insurance	6,900	6,800	100 U
Other fixed costs allocated:
Administrative expenses	12,000	9,000	3,000 U
Marketing expenses	9,300	7,000	1,300 U
Research and development	6,000	4,500	1,500 U
Total expenses	130,500	108,800	21,700 U
Operating income	19,500	26,200	6,700 U

While distributing the monthly reports at the meeting, Sharon Ang, the financial controller of Wood Art remarked that:

"Tommy, we need to talk about getting your division back on track. Be sure to see me after the meeting."

Tommy Tan had been so convinced the his division did reasonably well in April that Sharon Ang's remark was a real surprise. He spent the balance of the meeting avoiding the looks of his fellow managers and trying to figure out what could have gone wrong. The monthly performance report was no help.

Required: a) Identify three weaknesses in Wood Art's monthly bookcase production performance report.

b) Recommend how the report could be improved to eliminate weaknesses, and revise it accordingly.

c) Discuss how the recommended changes in reporting are likely to affect Tommy's behavior.