Durham Company uses a responsibility reporting system. It has divisions in Denve
ID: 2465654 • Letter: D
Question
Durham Company uses a responsibility reporting system. It has divisions in Denver, Seattle, and San Diego. Each division has three production departments: Cutting, Shaping, and Finishing. The responsibility for each department rests with a manager who reports to the division production manager. Each division manager reports to the vice president of production. There are also vice presidents for marketing and finance. All vice presidents report to the president.
In January 2017, controllable actual and budget manufacturing overhead cost data for the departments and divisions were as shown below.
Manufacturing Overhead
Actual
Budget
$73,200
$69,800
48,100
45,600
20,500
17,700
20,200
16,700
22,100
19,700
$184,100
$169,500
Additional overhead costs were incurred as follows: Seattle division production manager—actual costs $52,600, budget $51,500; vice president of production—actual costs $65,000, budget $63,500; president—actual costs $76,400, budget $73,800. These expenses are not allocated.
The vice presidents who report to the president, other than the vice president of production, had the following expenses.
Vice President
Actual
Budget
Prepare the Manufacturing overhead—Cutting Department manager—Seattle division responsibility report.
Total
Prepare the Manufacturing overhead—Seattle division manager responsibility report.
Rank the comparative performances of department managers in the Seattle Division.
Prepare the Manufacturing overhead—vice president of production responsibility report.
Rank the comparative performances of division managers.
Prepare the Manufacturing overhead and expenses—president responsibility report.
Rank the comparative performances of vice presidents.
Manufacturing Overhead
Actual
Budget
Individual costs—Cutting Department—Seattle Indirect labor$73,200
$69,800
Indirect materials48,100
45,600
Maintenance20,500
17,700
Utilities20,200
16,700
Supervision22,100
19,700
$184,100
$169,500
Explanation / Answer
Durham Company Responsibility report For the period ended Jan 2017 To Cutting Department Manager Budget Actual Difference Favorable / Unfavorable Indirect Labor 69,800 73,200 3,400 Unfavorable Indirest materials 45,600 48,100 2,500 Unfavorable Maintenance 17,700 20,500 2,800 Unfavorable Utilities 16,700 20,200 3,500 Unfavorable Supervision 19,700 22,100 2,400 Unfavorable Total 169,500 184,100 14,600 Unfavorable To Seattle Division Manager Budget Actual Difference Favorable / Unfavorable Cutting Department Costs 169,500 184,100 14,600 Unfavorable Shaping Department Costs 148,700 158,000 9,300 Unfavorable Finishing Department Costs 204,400 212,000 7,600 Unfavorable Additional Overheads 51,500 52,600 1,100 Unfavorable Total 574,100 606,700 32,600 Unfavorable To Vice President - Production Budget Actual Difference Favorable / Unfavorable Rank Denver Division 673,400 678,300 4,900 Unfavorable 1 San Diego Division 715,100 722,300 7,200 Unfavorable 2 Seattle Division 574,100 606,700 32,600 Unfavorable 3 Additional Costs - VP 63,500 65,000 1,500 Unfavorable Total 2,026,100 2,072,300 46,200 Unfavorable To President Budget Actual Difference Favorable / Unfavorable Rank Vice President - Production 2,026,100 2,072,300 46,200 Unfavorable 3 Vice President - Marketing 130,000 134,000 4,000 Unfavorable 2 Vice President - Finance 105,000 108,700 3,700 Unfavorable 1 Additional costs - President 73,800 76,400 2,600 Unfavorable Total 2,334,900 2,391,400 56,500 Unfavorable
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