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		34,000		31,000
Direct labor wages	$	70,900	$	65,100	$	5,800	U
Supplies		20,700		18,600		2,100	U
Maintenance		139,100		136,000		3,100	U
Utilities		16,100		15,500		600	U
Supervision		34,000		34,000		0
Depreciation		84,000		84,000		0
Total	$	364,800	$	353,200	$	11,600	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 $95,700; the fixed component of the budgeted utilities cost is $12,400.

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

	Actual	Spending variances		Flexible budget	Activity variances		Planning budget
Machine-hours	34000			34000			31000
Direct labor wages	70900	500	F	71400	6300	U	65100
Supplies	20700	300	U	20400	1800	U	18600
Maintenance	139100	800	F	139900	3900	U	136000
Utilities	16100	300	U	15800	300	U	15500
Supervision	34000	0	None	34000	0	None	34000
Depreciation	84000	0	None	84000	0	None	84000
Total	364800	700	F	365500	12300	U	353200