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			40,000
Direct labor wages	$	89,600		$	86,800		$	2,800	U
Supplies		28,300			25,600			2,700	U
Maintenance		25,000			22,900			2,100	U
Utilities		22,700			21,500			1,200	U
Supervision		55,000			55,000			0
Depreciation		95,000			95,000			0
Total	$	315,600		$	306,800		$	8,800	U

“I just can’t understand all of 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 $17,700; the fixed component of the budgeted utilities cost is $14,200.

Required:

2. Complete the performance report that will help Mr. Weston’s superiors assess how well costs were controlled in the machining department. (Round your intermediate calculations to 2 decimal places. 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

	Activity Variances	Spending Variances
Direct Labor wages	$ 4340 U	$1540 F
Supplies	1280 U	1420 U
Maintenance	260 U	1840 U
Utilities	365 U	835 U
Supervision	0	0
Depreciation	0	0
Total	$6245 U	$2555 U