Question

Problem 22-1A Responsibility accounting performance reports; controllable and budgeted costs LO P1 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 $ 196,000 $ 277,400 $ 473,400 $ 195,000 $ 273,400 $ 468,400 Employee wages 105,000 206,200 311,200 106,800 206,400 313,200 Dept. manager salary 43,800 52,000 95,800 44,000 53,900 97,900 Supplies used 33,800 91,400 125,200 32,900 91,300 124,200 Depreciation—Equip. 61,000 126,500 187,500 63,600 126,000 189,600 Utilities 4,400 5,600 10,000 4,500 5,000 9,500 Building rent 5,700 9,600 15,300 5,200 9,100 14,300 Office department costs 67,750 67,750 135,500 65,550 65,550 131,100 Totals $ 517,450 $ 836,450 $ 1,353,900 $ 517,550 $ 830,650 $ 1,348,200 The office department’s annual budget and its actual costs follow. Budget Actual Plant manager salary $ 84,000 $ 98,000 Other office salaries 46,500 26,800 Other office costs 5,000 6,300 Totals $ 135,500 $ 131,100 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.

Answer 1

a.

Responsibility Accounting Performance Report
Manager: Camper Department
	Budgeted	Actual	Over ( Under)
	$	$	$
Controllable Costs
Raw Materials	196,000	195,000	(1,000)
Employee Wages	105,000	106,800	1,800
Supplies Used	33,800	32,900	(900)
Depreciation : Equipment	61,000	63,600	2,600
Totals	395,800	398,300	2,500

b.

Responsibility Accounting Performance Report
Manager: Trailer Department
	Budgeted	Actual	Over ( Under)
	$	$	$
Controllable Costs
Raw Materials	277,400	273,400	(4,000)
Employee Wages	206,200	206,400	200
Supplies Used	91,400	91,300	(100)
Depreciation : Equipment	126,500	126,000	(500)
Totals	701,500	697,100	(4,400)