You are a hotshot MBA financial analyst for the manager of the Emmons Corporations Machining Department. Your manager is visibly upset after being reprimanded for his departments poor performance over the last month, as presented in the below report:

Emmons Corporation Machining Department

Department Performance Report

For the Month of November 2016

	Actual Results	Original Planning Budget	Variances
Volume-Machine Hours	38,000	35,000
Direct Labor Wages	$86,100	$80,500		$5,600 U
Supplies	$23,100	$21,000		$2,100 U
Maintenance	$137,300	$134,000		$3,300 U
Utilities	$15,700	$15,200		$500 U
Supervision	$38,000	$38,000		-----
Depreciation	$80,000	$80,000		-----
Total	$380,200	$368,700		$11,500 U

I just cant understand all these unfavorable variances, your manager complained to you. When the big boss called me in, I thought she was going to give me a pat on the back for the great job that we had done in November. Instead, she handed me a copy of this report, read me the riot act, and pointed out to me that every variance was unfavorable! I need your help in countering the conclusions of this report.

Your manager gives you the above report and you go back to your office to study and prepare the response for your manager. You know that direct labor wages and supplies are variable costs; supervision and depreciation are fixed costs, and maintenance and utilities are mixed costs. The fixed component of the original budget maintenance cost is $92,000. The fixed component of the original budget utilities cost is $11,700.

Required:

1. You recall studying flexible budgets in your amazing MBA program. Using a flexible budget approach, prepare the more appropriate performance report for your manager.
2. Based on your report in a above, how would you evaluate your departments performance?