Question

Frank Weston, supervisor of the Freemont Corporation’s Machining Department, was visibly upset after being reprimanded for his department’s poor performance over the prior month. The department’s cost control report is given below:

Freemont Corporation–Machining Department Cost Control Report For the Month Ended June 30
	Actual Results			Planning Budget			Variances
Machine-hours		42,000			40,000
Direct labor wages	$	76,600		$	74,800		$	1,800	U
Supplies		23,300			21,600			1,700	U
Maintenance		23,100			20,900			2,200	U
Utilities		20,800			19,500			1,300	U
Supervision		45,000			45,000			0
Depreciation		75,000			75,000			0
Total	$	263,800		$	256,800		$	7,000	U

“I just can’t understand all of these unfavorable variances,” Weston complained to the supervisor of another department. “When the boss called me in, I thought he was going to give me a pat on the back because I know for a fact that my department worked more efficiently last month than it has ever worked before. Instead, he tore me apart. I thought for a minute that it might be over the supplies that were stolen out of our warehouse last month. But they only amounted to a couple of hundred dollars, and just look at this report. Everything is unfavorable.”

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 budgeted maintenance cost is $13,700; the fixed component of the budgeted utilities cost is $13,200.

Required:

2. Complete the performance report that will help Mr. Weston’s superiors assess how well costs were controlled in the machining department. (Round your intermediate calculations to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Answer 1

Freemont Corporation - Machining Department
Flexible Budget performance report
For the month ended June 30
		Actual results	Spending Variances		Flexible Budget	Activity Variance		Planning Budget
Machine - hours		42000			42000			40000
Direct labor wages	($74800/40000)*42000	$           76,600	$         1,940	F	$      78,540	$         3,740	U	$    74,800
Supplies	($21600/40000)*42000	$           23,300	$             620	U	$      22,680	$         1,080	U	$    21,600
Maintenance	$13700 + [($20900-$13700)/40000]*42000	$           23,100	$         1,840	U	$      21,260	$            360	U	$    20,900
Utilities	$13200 + [($19500-$13200)/40000]*42000	$           20,800	$             880	U	$      19,920	$            420	U	$    19,500
Supervision	$                            45,000	$           45,000	$                -	None	$      45,000	$                -	None	$    45,000
Depreciation	$                            75,000	$           75,000	$                -	None	$      75,000	$                -	None	$    75,000
Total		$       2,63,800	$         1,400	U	$   2,62,400	$         5,600	U	$2,56,800