Question

Campbell Corporation has four divisions: the assembly division, the processing division, the machining division, and the packing division. All four divisions are under the control of the vice president of manufacturing. Each division has a manager and several departments that are directed by supervisors. The chain of command runs downward from vice president to division manager to supervisor. The processing division is composed of the paint and finishing departments. The May responsibility reports for the supervisors of these departments follow:

	Budgeted*				Actual				Variance
Paint Department
Controllable costs
Raw materials	$	62,000			$	65,000			$	3,000	U
Labor		59,700				68,000				8,300	U
Repairs		6,800				5,670				1,130	F
Maintenance		4,600				4,260				340	F
Total	$	133,100			$	142,930			$	9,830	U
Finishing Department
Controllable costs
Raw materials	$	50,000			$	47,000			$	3,000	F
Labor		47,300				41,900				5,400	F
Repairs		3,830				4,370				540	U
Maintenance		2,880				3,650				770	U
Total	$	104,010			$	96,920			$	7,090	F

*Campbell uses flexible budgets for performance evaluation.

Other pertinent cost data for May follow.

	Budgeted*				Actual
Cost data of other divisions
Assembly	$	390,000			$	376,300
Machining		300,000				316,400
Packing		424,950				407,700
Other costs associated with
Processing division manager		224,000				221,600
Vice president of manufacturing		138,000				148,060

*Campbell uses flexible budgets for performance evaluation.

Required

1. Prepare a responsibility report for the manager of the processing division.

2. Prepare a responsibility report for the vice president of manufacturing.

Answer 1

Report for the manager of processing division
	Budgeted	Actual	Variance	unfavour/favour
Paint Department
Controllable costs
Raw materials	62,000	65,000	3,000	U
Labor	59,700	68,000	8,300	U
Repairs	6,800	5,670	1,130	F
Maintenance	4,600	4,260	340	F
Total	133,100	142,930	9,830	U
Finishing Department
Controllable costs
Raw materials	50,000	47,000	3,000	F
Labor	47,300	41,900	5,400	F
Repairs	3,830	4,370	540	U
Maintenance	2,880	3,650	770	U
Total	104,010	96,920	7,090	F

Based on the above data analysis, in Paint department raw material & labour cost has been incurred over & above of budgeted amount, hence it is unfavourable. It is controllable cost the manager can ask supervisor for the same.

Summary report for each division
	Budgeted	Actual	Variance	Favour/unfavour
Processing division	237110	239850	-2740	U
Assembly division	390,000	376,300	13700	F
Machining division	300,000	316,400	-16400	U
Packing division	424,950	407,700	17250	F
Total	1352060	1340250	11810	F

1.Processing division cost is not in favour, it means he has take action immediately why cost is incurred over and above of budgeted amount.

2.. Assembly division cost is in favour, it means he is working in good way.

3.Machining division cost is not in favour, it means he has take action immediately why cost is incurred over and above of budgeted amount.

4.Packing division cost is in favour, it means he is working in good way.

Report for the Vice Presidentr of Manufacturing- Particular Budgeted Actual Processing division manager 224,000 221,600 Vice president of manufacturing 138,000 148,060

As per analysis of above data wa can say that overall cost for processing division manager is in favourable amount, so we can not raise question on divisional manager.
However we can see that actual cost of vice president of manufacturing is higher that the budgeted amount. so, president may ask question to vice president that why it is do higher. so that he can take action on that immediately that why budget amount exceeded this particular time & what corrective action has been take for that.