Help Problem 9-26 Critiquing a Cost Report; Preparing a Performance Report [LO9-
ID: 2431266 • Letter: H
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Help Problem 9-26 Critiquing a Cost Report; Preparing a Performance Report [LO9-1, LO9-2, Lo9-3, LO9-4, LO9-6) Frank Weston, supervisor of th department's poor performance over the prior month. The d e Freemont Corporation's Machining Department, was visibly upset after being reprimanded for his epartment's cost control report is given below: hining Cost control Report For the Month Ended June 30 Actual Pl anning 42,000 40,000 Direct labor wages $ 92,200 89,200 $3,00o U 29,300 25,600 23,300 57,000 99,000 26,4002,900 U 23,300 2,300 U 21,900 1,400 u 57,000 99,000_ Utilities Supervision Total 326,400 $316, 800 $9,600 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 $18,500; the fixed component of the budgeted utilities cost is $14,400Explanation / Answer
Freemont Corporation - Machining Department
Flexible Budget Performance Report
For the month ended June 30
Actual Results
Revenue and Spending variances
Flexible Budget
Activity Variance
Planning Budget
Machine Hours
42000
42000
40000
Direct labor wages
$92,200
1460
F
93660
-4460
U
$89,200
(42000*(89200/40000))
Supplies
29,300
-1580
U
27720
-1320
U
26,400
(42000*(26,400/40,000))
Maintenance
25,600
-2060
U
23,540
-240
U
23,300
(18,500+(42000*((23,300-18,500)/40000)))
Utilities
23,300
-1025
U
22275
-375
U
21,900
(14,400+42000*((21,900-14,400)/40000)))
Supervision
57,000
0
57,000
0
57,000
Depreciation
99,000
0
99,000
0
99,000
Total
$326,400
-3205
U
365,195
-6395
$316,800
Freemont Corporation - Machining Department
Flexible Budget Performance Report
For the month ended June 30
Actual Results
Revenue and Spending variances
Flexible Budget
Activity Variance
Planning Budget
Machine Hours
42000
42000
40000
Direct labor wages
$92,200
1460
F
93660
-4460
U
$89,200
(42000*(89200/40000))
Supplies
29,300
-1580
U
27720
-1320
U
26,400
(42000*(26,400/40,000))
Maintenance
25,600
-2060
U
23,540
-240
U
23,300
(18,500+(42000*((23,300-18,500)/40000)))
Utilities
23,300
-1025
U
22275
-375
U
21,900
(14,400+42000*((21,900-14,400)/40000)))
Supervision
57,000
0
57,000
0
57,000
Depreciation
99,000
0
99,000
0
99,000
Total
$326,400
-3205
U
365,195
-6395
$316,800
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