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		39,000
Direct labor wages	$	111,900	$	105,300	$	6,600	U
Supplies		34,100		31,200		2,900	U
Maintenance		147,900		144,000		3,900	U
Utilities		17,500		17,100		400	U
Supervision		42,000		42,000		0
Depreciation		100,000		100,000		0
Total	$	453,400	$	439,600	$	13,800	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 $89,400; 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. (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 variance	Flexible budget	Activity variance	Planning Budget
Machine-hours		42,000		42000			39,000
Direct labor wages	$	111,900	1500 F	113400	8100 U	$	105,300
Supplies		34,100	500 U	33600	2400 U		31,200
Maintenance		147,900	300 F	148200	4200 U		144,000
Utilities		17,500	100 U	17400	300 U		17,100
Supervision		42,000	0 None	42000	0 None		42,000
Depreciation		100,000	0 None	100000	0 None		100,000
Total	$	453,400	1200 F	454600	15000 U	$	439,600