Question

50. Analysis of cost report (adapted from CMA exam). Judy is the production manager of Test Images, a division of the largest corporation, Image View, Inc. Judy has complained several times to the corporate office that the cost reports used to evaluate her plant are misleading. She states “I know how to get good quality product out at low cost. The cost reports do not show any of this; they are always negative no matter what is do. There is no way you can win with accounting or the people at headquarters who use these reports.” A copy of the latest report follows:

TEST IMAGES Cost Report

Month of November (in thousands)

Master Budget    Actual Cost    Excess

Raw Material 500    550    50

Direct Labor 700 650 (50)   

Overhead    150 180    30   

Total    $ 1,350    $ 1,380 $30   

Identify and explain changes to the report that would make the cost information more meaningful to the production managers.

Answer 1