Frank Weston, supervisor of the Freemont Corporation\'s Machining Department, wa

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: Variances Freemont Corporation Machining Department Cost Control Report For the Month Ended June 30 Planning Actual Results Budget Machine-hours 38.000 35.000 Direct labor wages $ 93,700 S 87,500 Supplies 23,500 21,000 Maintenance 143,500 140,000 Utilities 17,100 16,300 Supervision 38,000 38,000 Depreciation 92,000 92,000 Total 407,800 S 394,800 $ 6,200 U 2,500 U 3,500 U 800 U 0 $13,000 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 $91,000; the fixed component of the budgeted utilities cost is $12,800. 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 (ie., zero variance). Input all amounts as positive values.) Activity Variances Direct labor wages Supplies Maintenance Utilities Supervision Depreciation Total Freemont Corporation Machining Department Flexible Budget Performance Report For the Month Ended June 30 Actual Flexible Results Spending Variances Budget S 93,700 23,500 143,500 F 17,100 None 38,000 None 92.000 None 407,800 ?????? Planning Budget $ 87,500 21,000 140,000 16,300 38,000 92.000 S 394,800 None None

Explanation / Answer

Freemont CorporationMachining Department Flexible Budget Performance Report For the Month Ended June 30 Actual Result Revenue and Spending Variances Flexible Budget Activity Variances Planning Budget Working note: Flexible Budget   Machine-hours $38,000 $38,000 $35,000   Direct labor wages $93,700 $1,300 F $95,000 $7,500 U $87,500 =$87500/35000X38000   Supplies $23,500 $700 U $22,800 $1,800 U $21,000 =$21000/35000X38000   Maintenance $143,500 $700 F $144,200 $4,200 U $140,000 ({($140000-91000)/35000}X38000)+91000   Utilities $17,100 $500 U $16,600 $300 U $16,300 ({($16300-12800)/35000}X38000)+12800   Supervision $38,000 $0 None $38,000 $0 None $38,000 Fixed   Depreciation $92,000 $0 None $92,000 $0 None $92,000 Fixed   Total $407,800 $38,800 F $446,600 $51,800 U $394,800

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