Sue Jaski, supervisor of the Karaki Corporation’s Machining Department, was visi

Question

Sue Jaski, supervisor of the Karaki Corporation’s Machining Department, was visibly upset after being reprimanded for her department’s poor performance over the prior month. The department’s cost control report is given below:

       “I just can’t understand all the red ink,” Jaski 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 $17,300; the fixed component of the budgeted utilities cost is $14,100.

Sue Jaski, supervisor of the Karaki Corporation’s Machining Department, was visibly upset after being reprimanded for her department’s poor performance over the prior month. The department’s cost control report is given below:

Explanation / Answer

karaki Corporation Machining Department Flexible Budget Performance Report For the Month Ended June 30 Actual Results Spending Variances Flexible Budget Activity Variances Planning Budget Variable Cost per hour Of Actual Variable Cost per hour Of Budgeted Machine-hours (q) 42,000 40,000 Supplies $27,800 $1,340.00 U $26,460.00 $1,260.00 U $25,200 $0.66 $0.63 Wages and salaries 87,000 ($7,431.75) F $94,431.75 $8,831.75 U 85,600 $3.13 $3.40 Utilities-Variable 5,800 -500 F 6300 $300.00 U 6,000 0.14 0.15 Utilities-Fixed 14,100 14,100 Maintanenece-Variable 4,100 -67 F 4167.056075 $67.06 U 4,100 0.05 0.048 Maintanenece-Fixed 17,300 0 0 17,300 Supervision 54,000 54,000 Equipment depreciation 93,000 0 0 104000 0 0 93,000 Total $303,100 ($6,658.80) F $0 $10,458.80 $299,300 Total unfavouable=10548-6658 $3,800.00 U In flexible budget fixed cost remain same there is change in variable cost according to production Now after dividing supplies,scrap,Indirect material from the machine hours we get cost per hour. Now we multiply the actual hours with budgeted variable cost per unit to get the figures in Flexible budget Spending variance= Actual Cost-Standard cost for actual quantity Activity Variance= Actual HoursXStandard Rate-Standard hoursXStandard rate

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