PORTER CORPORATION Performance Report for the Month of June, 2015 Total Actual Costs Total Budgeted Costs Variances Direct material Direct labor.. Variable overhead. Fixed overhead. $216,630 119,340 63,000 184,000 $237,600 132,000 66,000 184,000 $20,970 F 12,660 F 3,000 F $582,970 $619,600 $36,630 F In his presentation at Porter's month-end management meeting. Harlow indicated that things were going "fantastically." "The figures indicate," he said, "that the firm is beating its budget in all cost categories." This good news made everyone at the meeting happy and furthered Harlow's acceptance as a member of the management team. After the management meeting. Susan Jones, Porter's general manager, asked you, as an inde- pendent consultant, to review Harlow's report. Jones' concern stemmed from the fact that Porter has never operated as favorably as Harlow's report seems to imply, and she cannot explain the apparent significant improvement. While reviewing Harlow's report, you are provided the following cost and operating data for June: Porter has a monthly normal capacity of 11,000 direct labor hours or 8,800 units of product. Standard costs per unit for its only product are direct material, 3 pounds at $9 per pound; direct labor, 1.25 hours at $12 per hour, and variable overhead rate per direct labor hour of $6. During June, Porter produced 8,000 units of product, using 24,900 pounds of material costing $8.70 each, 10,200 direct labor hours at an average rate of $11.70 ecach, and incurred variable overhead costs of $63,000 and fixed overhead costs of S184,000. After reviewing Porter's June cost data, you tell Harlow that his cost report contains a classic budgeting error, and you explain how he can remedy it. In response to your suggestion, Harlow revises his report as follows: Total Actual Total Budgeted Costs Costs Variances $216,630 $216,000 120.000 60,000 184,000 $580,000 $ 630 U 660 F 3,000 U Direct material Direct labor.. Variable overhead. Fixed overhead. 119,340 63,000 184,000 $582,970 $2.970 U Harlow's revised report is accompanied by remarks expressing regret at the oversight in the original report. Required In your role as consultant. Verify that Harlow's actual cost figures are correct. b. Identify and explain the classic budgeting error that Harlow apparently incorporated into his original cost report. Explain why Harlow's revised figures could be considered deficient. a. C. d. Further analyze Harlow's revised variances, isolating underlying potential causal factors How do your analyses indicate bases for concern to management?
PORTER CORPORATION Performance Report for the Month of June, 2015 Total Actual Costs Total Budgeted Costs Variances Direct material Direct labor.. Variable overhead. Fixed overhead. $216,630 119,340 63,000 184,000 $237,600 132,000 66,000 184,000 $20,970 F 12,660 F 3,000 F $582,970 $619,600 $36,630 F In his presentation at Porter's month-end management meeting. Harlow indicated that things were going "fantastically." "The figures indicate," he said, "that the firm is beating its budget in all cost categories." This good news made everyone at the meeting happy and furthered Harlow's acceptance as a member of the management team. After the management meeting. Susan Jones, Porter's general manager, asked you, as an inde- pendent consultant, to review Harlow's report. Jones' concern stemmed from the fact that Porter has never operated as favorably as Harlow's report seems to imply, and she cannot explain the apparent significant improvement. While reviewing Harlow's report, you are provided the following cost and operating data for June: Porter has a monthly normal capacity of 11,000 direct labor hours or 8,800 units of product. Standard costs per unit for its only product are direct material, 3 pounds at $9 per pound; direct labor, 1.25 hours at $12 per hour, and variable overhead rate per direct labor hour of $6. During June, Porter produced 8,000 units of product, using 24,900 pounds of material costing $8.70 each, 10,200 direct labor hours at an average rate of $11.70 ecach, and incurred variable overhead costs of $63,000 and fixed overhead costs of S184,000. After reviewing Porter's June cost data, you tell Harlow that his cost report contains a classic budgeting error, and you explain how he can remedy it. In response to your suggestion, Harlow revises his report as follows: Total Actual Total Budgeted Costs Costs Variances $216,630 $216,000 120.000 60,000 184,000 $580,000 $ 630 U 660 F 3,000 U Direct material Direct labor.. Variable overhead. Fixed overhead. 119,340 63,000 184,000 $582,970 $2.970 U Harlow's revised report is accompanied by remarks expressing regret at the oversight in the original report. Required In your role as consultant. Verify that Harlow's actual cost figures are correct. b. Identify and explain the classic budgeting error that Harlow apparently incorporated into his original cost report. Explain why Harlow's revised figures could be considered deficient. a. C. d. Further analyze Harlow's revised variances, isolating underlying potential causal factors How do your analyses indicate bases for concern to management?
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter23: Flexible Budgeting (flexbud)
Section: Chapter Questions
Problem 4R
Related questions
Question
100%
I have the other problems solved but I am having a hard time with part D of the assignment,
Further analyze harlows revised variances, isolating underlying potential causal factors. How do your analyses indicate bases for concern to management
I have attached the problem with the data information
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning