Problem 22-6A (Part Level Submission) Durham Company uses a responsibility repor

Question

Problem 22-6A (Part Level Submission) 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 Individual costs-Cutting Department-Seattle Indirect labor Indirect materials Maintenance Utilities Supervision 48,000 20,600 20,400 22,500 $184,700 $73,200 $69,800 45,500 17,900 16,800 19,500 Total costs $157,500 $148,700 204,300 672,600 715,300 Shaping Department-Seattle 211,400 678,100 721,500 Finishing Department-Seattle Denver division San Diego division Additional overhead costs were incurred as follows: Seattle division production manager-actual costs $52,000, budget $50,600; vice president of production-actual costs $65,100, budget $64,300; president-actual costs $76,500, budget $74,200. These expenses are not allocated The vice presidents who report to the president, other than the vice president of production, had the following expenses Actual Budget Vice President Marketing Finance $133,100 108,800 $130,100 105,500

Explanation / Answer

a.(1) To cutting Department Mnager - Seattle Division Controllable Costs Budget Actual Variance Favourable/ Unfavourable Indirect labor 69800 73200 3400 Unfavourable Indirect materials 45500 48000 2500 Unfavourable Maintenance 17900 20600 2700 Unfavourable Utilities 16800 20400 3600 Unfavourable Supervision 19500 22500 3000 Unfavourable Total 169500 184700 15200 Unfavourable a.(2) To Divisional Manager - Seattle Controllable Costs Budget Actual Variance Favourable/ Unfavourable Seattle Division 522500 553600 31100 Unfavourable Departments : Cutting Department 169500 184700 15200 Unfavourable Shaping department 148700 157500 8800 Unfavourable Finishing department 204300 211400 7100 Unfavourable Total 522500 553600 31100 Unfavourable Ranking Finishing department 3.48% 1 Shaping department 5.92% 2 Cutting Department 8.97% 3 a.(3) To Vice President - Production Controllable Costs Budget Actual Variance Favourable/ Unfavourable V-P Production 1910400 1953200 42800 Unfavourable Divisions: Seattle Division 522500 553600 31100 Unfavourable Denver Division 672600 678100 5500 Unfavourable San Diego Division 715300 721500 6200 Unfavourable Total 1910400 1953200 42800 Unfavourable Ranking Denver Division 0.82% 1 San Diego Division 0.87% 2 Seattle Division 5.95% 3 a.(4) To President Controllable Costs Budget Actual Variance Favourable/ Unfavourable President 2146000 2195100 49100 Unfavourable Vice Presidents Production 1910400 1953200 42800 Unfavourable Marketing 130100 133100 3000 Unfavourable Finance 105500 108800 3300 Unfavourable Total 2146000 2195100 49100 Unfavourable Ranking Production 2.24% 1 Marketing 2.31% 2 Finance 3.13% 3

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