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: Freemont Corporation-Machining Department Cost Control Report For the Month Ended June 30 Actual Results 42,000 Planning Budget Variances Machine-hours 40,000 Direct labor wages Supplies Maintenance Utilities Supervision Depreciation 92,200 29,300 25,600 23,300 57,000 99,000 326,400 $89,200 3,000 U 2,900 tU 2,300 U 1,400 U 26,400 23,300 21,900 57,000 99,000 Total $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 l 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 $14,400

Explanation / Answer

Actual results Spending variances Flexible budget Activity variances Planning budget Machine hours 42000 42000 40000 Direct labor wages 92200 1460 F 93660 4460 U 89200 Supplies 29300 1580 U 27720 1320 U 26400 Maintenance 25600 2060 U 23540 240 U 23300 Utilities 23300 1025 U 22275 375 U 21900 Supervision 57000 0 None 57000 0 None 57000 Depreciation 99000 0 None 99000 0 None 99000 Total 326400 3205 U 323195 6395 U 316800

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