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 Planning Actual Results Budget Variances 37,000 $ 87,700 26,200 34,000 S 81,600 6,100 U 23,800 Direct labor wages Supplies Maintenance Utilities 2,400 U 3,400U 750 U 0 142,400 139,000 16,850 37,000 90,000 16,100 37,000 90,000 Total $ 400,150 S387,500 $12,650 U "I just can't understand all 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 $94,800; the fixed component of the budgeted utilities cost is $11,000

Explanation / Answer

Actual Spending variances Flexible budget Activity variances Planning budget Direct labor wages 87700 1100 F 88800 7200 U 81600 Supplies 26200 300 U 25900 2100 U 23800 maintenance 142400 500 F 142900 3900 U 139000 Utilities 16850 300 U 16550 450 U 16100 Supervision 37000 0 None 37000 0 None 37000 Depreciation 90000 0 None 90000 0 None 90000 Total 400150 1000 F 401150 13650 U 387500

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