Question

Billie Whitehorse, the plant manager of Travel Free’s Indiana plant, is responsible for all of that plant’s costs other than her own salary. The plant has two operating departments and one service department. The camper and trailer operating departments manufacture different products and have their own managers. The office department, which Whitehorse also manages, provides services equally to the two operating departments. A budget is prepared for each operating department and the office department. The company’s responsibility accounting system must assemble information to present budgeted and actual costs in performance reports for each operating department manager and the plant manager. Each performance report includes only those costs that a particular operating department manager can control: raw materials, wages, supplies used, and equipment depreciation. The plant manager is responsible for the department managers’ salaries, utilities, building rent, office salaries other than her own, and other office costs plus all costs controlled by the two operating department managers. The annual departmental budgets and actual costs for the two operating departments follow.

	Budget										Actual
	Campers			Trailers			Combined			Campers			Trailers			Combined
Raw materials	$	195,700		$	275,800		$	471,500		$	194,700		$	273,200		$	467,900
Employee wages		105,950			205,200			311,150			107,000			207,400			314,400
Dept. manager salary		43,600			52,900			96,500			44,700			54,100			98,800
Supplies used		33,600			90,800			124,400			32,600			92,200			124,800
Depreciation—Equip.		61,500			126,000			187,500			62,400			126,500			188,900
Utilities		4,600			5,600			10,200			3,600			6,800			10,400
Building rent		5,400			10,100			15,500			5,400			9,300			14,700
Office department costs		67,750			67,750			135,500			83,550			83,550			167,100
Totals	$	518,100		$	834,150		$	1,352,250		$	533,950		$	853,050		$	1,387,000

The office department’s annual budget and its actual costs follow.

	Budget			Actual
Plant manager salary	$	88,000		$	98,000
Other office salaries		40,500			26,400
Other office costs		7,000			42,700
Totals	$	135,500		$	167,100

Required:
1. Prepare responsibility accounting performance reports that list costs controlled by the following. In each report, include the budgeted and actual costs and show the amount that each actual cost is over or under the budgeted amount.
a. Manager of the camper department.
b. Manager of the trailer department.
c. Manager of the Indiana plant.

	Responsibility Accounting Performance Report Dept. Manager, Camper Department For the Year Budgeted Amount Actual Amount Over (Under) Budget Controllable Costs Raw materials Employee wages Supplies used Depreciation—Equipment Totals $0 $0 $0

• 	Responsibility Accounting Performance Report Dept. Manager, Trailer Department For the Year Budgeted Amount Actual Amount Over (Under) Budget Controllable Costs Raw materials Employee wages Supplies used Depreciation—Equipment Totals $0 $0 $0

• 	Responsibility Accounting Performance Report Plant Manager, Indiana Plant For the Year Budgeted Amount Actual Amount Over (Under) Budget Controllable Costs Department manager salaries Utilities Building rent Other office salaries Other office costs Camper department Trailer department Totals $0 $0 $0

Answer 1

a.	Camper Department
		Budgeted Amount	Actual Amount	Over / (under) Budget
	Controllable cost:
	Raw materials	$       1,95,700	$       1,94,700	$       -1,000
	Employee wages	$       1,05,950	$       1,07,000	$         1,050
	Supplies used	$           33,600	$           32,600	$       -1,000
	Depreciation Equipment	$           61,500	$           62,400	$            900
	Total	$       3,96,750	$       3,96,700	$             -50
b.	Trailer Department
		Budgeted Amount	Actual Amount	Over / (under) Budget
	Controllable cost:
	Raw materials	$       2,75,800	$       2,73,200	$       -2,600
	Employee wages	$       2,05,200	$       2,07,400	$         2,200
	Supplies used	$           90,800	$           92,200	$         1,400
	Depreciation Equipment	$       1,26,000	$       1,26,500	$            500
	Total	$       6,97,800	$       6,99,300	$         1,500
c.	Indiana Plant
		Budgeted Amount	Actual Amount	Over / (under) Budget
	Department manager salary	$           96,500	$           98,800	$         2,300
	Utilities	$           10,200	$           10,400	$            200
	Building rent	$           15,500	$           14,700	$           -800
	Other office salaries	$           40,500	$           26,400	$     -14,100
	Other office costs	$             7,000	$           42,700	$      35,700
	Camper Department	$       3,96,750	$       3,96,700	$             -50
	Trailer Department	$       6,97,800	$       6,99,300	$         1,500
	Total	$     12,64,250	$     12,89,000	$      24,750

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