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You have observed that some of the costs vary with the number of productions, some with the machine hours, and some are fixed and depend
You have observed that some of the costs vary with the number of productions, some with the machine hours, and some are fixed and depend on neither the number of productions nor the machine hours. The costs of supplies, and machine setup vary only with the number of productions. On the other hand, supervisory salaries, gasoline, and maintenance expenses vary with the machine hours. Similarly, factory space rent and utilities expenses will vary with the machine hours. Administrative expenses are more difficult to pin down, but the best estimate is that approximately 75% of the budgeted costs are fixed, 15% depend on the number of productions, and the remaining 10% depend on the machine hours. You are presented with the following actual results for the year from Mr. Monem: Unilever Bangladesh Actual Costs For the Year Ended December 31 Actual number of productions 4 Actual machine hours 64 Supervisory salaries Tk. 148,000 Gasoline expenses 28,600 Maintenance expenses 12,300 Supplies 39,300 Factory space rent 49,600 Utilities expenses 10,950 Machine Setup expenses 12,000 Administrative expenses 41,650 Total Tk. 342,400 Answer the following questions: 18+2=101 a) Prepare a flexible budget performance report for the year that shows both activity variances and spending variances. [You must provide the supporting calculations to derive the cost formulas) b) If you were the CFO of the Unilever Bangladesh, would you be pleased with how well costs were controlled during the year? Why or why not? You have observed that some of the costs vary with the number of productions, some with the machine hours, and some are fixed and depend on neither the number of productions nor the machine hours. The costs of supplies, and machine setup vary only with the number of productions. On the other hand, supervisory salaries, gasoline, and maintenance expenses vary with the machine hours. Similarly, factory space rent and utilities expenses will vary with the machine hours. Administrative expenses are more difficult to pin down, but the best estimate is that approximately 75% of the budgeted costs are fixed, 15% depend on the number of productions, and the remaining 10% depend on the machine hours. You are presented with the following actual results for the year from Mr. Monem: Unilever Bangladesh Actual Costs For the Year Ended December 31 Actual number of productions 4 Actual machine hours 64 Supervisory salaries Tk. 148,000 Gasoline expenses 28,600 Maintenance expenses 12,300 Supplies 39,300 Factory space rent 49,600 Utilities expenses 10,950 Machine Setup expenses 12,000 Administrative expenses 41,650 Total Tk. 342,400 Answer the following questions: 18+2=101 a) Prepare a flexible budget performance report for the year that shows both activity variances and spending variances. [You must provide the supporting calculations to derive the cost formulas) b) If you were the CFO of the Unilever Bangladesh, would you be pleased with how well costs were controlled during the year? Why or why not
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