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		33,000		30,000
Direct labor wages	$	65,700	$	60,000	$	5,700	U
Supplies		17,000		15,000		2,000	U
Maintenance		138,000		135,000		3,000	U
Utilities		15,850		15,300		550	U
Supervision		33,000		33,000		0
Depreciation		82,000		82,000		0
Total	$	351,550	$	340,300	$	11,250	U

“I just can’t understand all 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 $93,000; the fixed component of the budgeted utilities cost is $12,000.

Required:

2. Complete the performance report that will help Mr. Weston’s superiors assess how well costs were controlled in the machining department. (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.)

Freemont Corporation—Machining Department
Flexible Budget Performance Report
For the Month Ended June 30
	Actual Results	Spending Variances		Flexible Budget	Activity Variances		Planning Budget
Direct labor wages	$65,700						$60,000
Supplies	17,000						15,000
Maintenance	138,000						135,000
Utilities	15,850						15,300
Supervision	33,000						33,000
Depreciation	82,000						82,000
Total	$351,550			$0			$340,300

Answer 1

2. Complete the performance report that will help Mr. Weston’s superiors assess how well costs were controlled in the machining department. (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.)

Freemont Corporation—Machining Department Flexible Budget Performance Report For the Month Ended June 30 Actual Results Spending Variances Flexible Budget Activity Variances Planning Budget Direct labor wages $65,700 300 F 66000 6000 U $60,000 Supplies 17,000 500 U 16500 1500 U 15,000 Maintenance 138,000 1200 F 139200 4200 U 135,000 Utilities 15,850 220 U 15630 330 U 15,300 Supervision 33,000 0 None 33000 0 None 33,000 Depreciation 82,000 0 None 82000 0 None 82,000 Total $351,550 780 F 352330 12030 U $340,300