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Problem 11-39 Budgets and Performance Evaluation (LO 11-1, 11-6) Johnson Electrical produces industrial ventilation fans. The company plans to manufacture 81,000 fans evenly over the next quarter at the following costs: direct material, $1,863,000; direct labor, $567,000; variable production overhead, $643,950; and fixed production overhead, $966,000. The $966,000 amount includes $99,000 of straight-line depreciation and $123,000 of supervisory salaries. Shortly after the conclusion of the quarter's first month, Johnson reported the following costs: $ 603,300 185,e00 218,e00 33, еее 43,300 246,000 Direct material Direct labor Variable production overhead Depreciation Supervisory salaries Other fixed production overhead Total $1,328,600 Dave Kellerman and his crews turned out 26,000 fans during the month-a remarkable feat given that the firm's manufacturing plant was closed for several days because of storm damage and flooding. Kellerman was especially pleased with the fact that overall financial performance for the period was favorable when compared with the budget. His pleasure, however, was very short-lived, as Johnson's general manager issued a stern warning that performance must improve, and improve quickly, if Kellerman had any hopes

Problem 11-39 Budgets and Performance Evaluation (LO 11-1, 11-6) Johnson Electrical produces industrial ventilation fans. The company plans to manufacture 81,000 fans evenly over the next quarter at the following costs: direct material, $1,863,000; direct labor, $567,000; variable production overhead, $643,950; and fixed production overhead, $966,000. The $966,000 amount includes $99,000 of straight-line depreciation and $123,000 of supervisory salaries. Shortly after the conclusion of the quarter's first month, Johnson reported the following costs: $ 603,300 185,e00 218,e00 33, еее 43,300 246,000 Direct material Direct labor Variable production overhead Depreciation Supervisory salaries Other fixed production overhead Total $1,328,600 Dave Kellerman and his crews turned out 26,000 fans during the month-a remarkable feat given that the firm's manufacturing plant was closed for several days because of storm damage and flooding. Kellerman was especially pleased with the fact that overall financial performance for the period was favorable when compared with the budget. His pleasure, however, was very short-lived, as Johnson's general manager issued a stern warning that performance must improve, and improve quickly, if Kellerman had any hopes

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter8: Budgeting For Planning And Control
Section: Chapter Questions
Problem 3CE: Refer to Cornerstone Exercise 8.2 for the production budgets for practice balls and match balls....
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Problem 11-39 Budgets and Performance Evaluation (LO 11-1, 11-6) Johnson Electrical produces industrial ventilation fans. The company plans to manufacture 81,000 fans evenly over the next quarter at the following costs: direct material, $1,863,000; direct labor, $567,000; variable production overhead, $643,950; and fixed production overhead, $966,000. The $966,000 amount includes $99,000 of straight-line depreciation and $123,000 of supervisory salaries. Shortly after the conclusion of the quarter's first month, Johnson reported the following costs: Direct material Direct labor Variable production overhead Depreciation Supervisory salaries Other fixed production overhead $ 603,300 185, 000 218, 000 33,000 43,300 246,000 Total $1,328,600 Dave Kellerman and his crews turned out 26,000 fans during the month-a remarkable feat given that the firm's manufacturing plant was closed for several days because of storm damage and flooding. Kellerman was especially pleased with the fact that overall financial performance for the period was favorable when compared with the budget. His pleasure, however, was very short-lived, as Johnson's general manager issued a stern warning that performance must improve, and improve quickly, if Kellerman had any hopes of keeping his job.
Transcribed Image Text:Problem 11-39 Budgets and Performance Evaluation (LO 11-1, 11-6) Johnson Electrical produces industrial ventilation fans. The company plans to manufacture 81,000 fans evenly over the next quarter at the following costs: direct material, $1,863,000; direct labor, $567,000; variable production overhead, $643,950; and fixed production overhead, $966,000. The $966,000 amount includes $99,000 of straight-line depreciation and $123,000 of supervisory salaries. Shortly after the conclusion of the quarter's first month, Johnson reported the following costs: Direct material Direct labor Variable production overhead Depreciation Supervisory salaries Other fixed production overhead $ 603,300 185, 000 218, 000 33,000 43,300 246,000 Total $1,328,600 Dave Kellerman and his crews turned out 26,000 fans during the month-a remarkable feat given that the firm's manufacturing plant was closed for several days because of storm damage and flooding. Kellerman was especially pleased with the fact that overall financial performance for the period was favorable when compared with the budget. His pleasure, however, was very short-lived, as Johnson's general manager issued a stern warning that performance must improve, and improve quickly, if Kellerman had any hopes of keeping his job.
Req 2 Req 3 Req 4 Req SA Req 5B Which of the two budgets would be more useful when planning the company's cash needs over a range of activity? would be more useful. Req 2 Req 3 Req 4 Req SA Req 5B Prepare a performance report that compares static budget and actual costs for the period just ended (i.e., the report that Kellerman likely used when assessing his performance). (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Do not round intermediate calculations.) Static Budget: Actual: 27,000 Units 26,000 Units Variance Total Req 2 Reg 3 Req 4 Reg 5A Reg 5B Prepare a performance report that compares flexible budget and actual costs for the period just ended (i.e., the report that the general manager likely used when assessing Kellerman's performance). (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Do not round intermediate calculations.) Flexible Budget: Actual: 26,000 Units 26,000 Units Variance Total Req 2 Req 3 Req 4 Req 5A Req 5B Which of the following two reports is preferred? A performance report based on Req 2 Req 3 Req 4 Req 5A Req 5B Which of the following statements is false? OThe general manager's warning is appropriate because of the sizable variances that have arisen. OWith the static budget, performance appears favorable. OKellerman's assessment regarding the favorable overall performance for the period is correct.
Transcribed Image Text:Req 2 Req 3 Req 4 Req SA Req 5B Which of the two budgets would be more useful when planning the company's cash needs over a range of activity? would be more useful. Req 2 Req 3 Req 4 Req SA Req 5B Prepare a performance report that compares static budget and actual costs for the period just ended (i.e., the report that Kellerman likely used when assessing his performance). (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Do not round intermediate calculations.) Static Budget: Actual: 27,000 Units 26,000 Units Variance Total Req 2 Reg 3 Req 4 Reg 5A Reg 5B Prepare a performance report that compares flexible budget and actual costs for the period just ended (i.e., the report that the general manager likely used when assessing Kellerman's performance). (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Do not round intermediate calculations.) Flexible Budget: Actual: 26,000 Units 26,000 Units Variance Total Req 2 Req 3 Req 4 Req 5A Req 5B Which of the following two reports is preferred? A performance report based on Req 2 Req 3 Req 4 Req 5A Req 5B Which of the following statements is false? OThe general manager's warning is appropriate because of the sizable variances that have arisen. OWith the static budget, performance appears favorable. OKellerman's assessment regarding the favorable overall performance for the period is correct.
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