Several years ago, Westmont Corporation developed a comprehensive budgeting syst
ID: 2487089 • Letter: S
Question
Several years ago, Westmont Corporation developed a comprehensive budgeting system for planning and control purposes. While departmental supervisors have been happy with the system, the factory manager has expressed considerable dissatisfaction with the information being generated by the system. A typical departmental cost report for a recent period follows:
Assembly Department
Cost Report
For the Month Ended March 31
Actual Results Planning Budget Variances
Machine-hours 15,000 20,000
Variable costs:
Supplies $ 9,900 $ 10,500 $ 600 F
Scrap 35,000 37,500 2,500 F
Indirect materials 101,000 120,000 19,000 F
Fixed costs:
Wages and salaries 79,900 75,000 4,900 U
Equipment depreciation 105,000 105,000 –
After receiving a copy of this cost report, the supervisor of the Assembly Department stated, “These reports are super. It makes me feel really good to see how well things are going in my department. I can’t understand why those people upstairs complain so much about the reports.”
For the last several years, the company’s marketing department has chronically failed to meet the sales goals expressed in the company’s monthly budgets.
Complete the new performance report for the quarter, based on Flexible Budget Performance approach. (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.)
Spending
Variances
After receiving a copy of this cost report, the supervisor of the Assembly Department stated, “These reports are super. It makes me feel really good to see how well things are going in my department. I can’t understand why those people upstairs complain so much about the reports.”
For the last several years, the company’s marketing department has chronically failed to meet the sales goals expressed in the company’s monthly budgets.
Complete the new performance report for the quarter, based on Flexible Budget Performance approach. (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.)
Actual results Spending VariancesSpending
Variances
Flexible Budgets Activity Variances Activity Variances Planning Budget Machine Hours (q) 15000 _ ________> 20000 Supplies 9900 10500 Scrap 35000 37500 Indirect Materials 101000 120000 Wages and Salaries 79900 75000 Equipment Depreciation 105000 105000 Total 330800 348000 . Were costs well controlled in March? Costs were well controlled Costs were not well controlledExplanation / Answer
Answer
Figures in $
Particulars
Actual Results
Spending Variances
Flexible budget
Activity Variances
Planning Budget
Total Variances
A
B
C
D
E
C-A
(E*15000/20000)
E-C
B+D
Machine Hours (q)
15000
20000
Supplies
9900
-2025
7875
2625
10500
600
Scrap
35000
-6875
28125
9375
37500
2500
Indirect Materials
101000
-11000
90000
30000
120000
19000
Wages & Salaries
79900
-23650
56250
18750
75000
-4900
Equipment Depreciation
105000
0
105000
0
105000
0
Total
330800
-43550
287250
60750
348000
Answer : No costs were not well controlled in March because all Spending Variances are Unfavourable.
Figures in $
Particulars
Actual Results
Spending Variances
Flexible budget
Activity Variances
Planning Budget
Total Variances
A
B
C
D
E
C-A
(E*15000/20000)
E-C
B+D
Machine Hours (q)
15000
20000
Supplies
9900
-2025
7875
2625
10500
600
Scrap
35000
-6875
28125
9375
37500
2500
Indirect Materials
101000
-11000
90000
30000
120000
19000
Wages & Salaries
79900
-23650
56250
18750
75000
-4900
Equipment Depreciation
105000
0
105000
0
105000
0
Total
330800
-43550
287250
60750
348000
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