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 Planning Budget Variances Machine-hours 42,000 40,000 Direct labor wages Supplies Maintenance Utilities Supervision Depreciation Total $ 88,30e $ 85,600 $2,700 U 2,600 U 27,800 24,700 22,400 54,000 93,000 25,200 22,5002,200 U 21,300 54,000 93,000 1,100 U $310, 200 $301,600 $8,600 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 $17,300; the fixed component of the budgeted utilities cost is $14,100

Explanation / Answer

Actual Spending variances Flexible budget Activity variances Planning budget Machine hours 42000 42000 40000 Direct labor wages 88300 1580 F 89880 4280 U 85600 Supplies 27800 1340 U 26460 1260 U 25200 Maintenance 24700 1940 U 22760 260 U 22500 Utilities 22400 740 U 21660 360 U 21300 Supervision 54000 0 None 54000 0 None 54000 Depreciation 93000 0 None 93000 0 None 93000 Total 310200 2440 U 307760 6160 U 301600

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