1.
Introduction: The difference between the planning budget and the flexible budget is known as activity variance. It arises due to the difference between the planned activity level and the actual activity level.
The usefulness of cost reports for the company.
2.
Introduction: The difference between the planning budget and the flexible budget is known as activity variance. It arises due to the difference between the planned activity level and the actual activity level.
To explain: The recommended changes in the reports for better controlling costs.
3.
Introduction: The difference between the planning budget and the flexible budget is known as activity variance. It arises due to the difference between the planned activity level and the actual activity level.
To prepare: The new performance report.
4.
Introduction: The difference between the planning budget and the flexible budget is known as activity variance. It arises due to the difference between the planned activity level and the actual activity level.
To evaluate: The performance of the assembly department.
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MANAGERIAL ACCT W/ACCESS
- Preparing a Flexible Budget for Performance Reporting Suppose you receive the following performance report from the accounting department for your first month as plant manager for a new company. Your supervisor, the vice president of manufacturing, has concerns that the report does not provide an accurate picture of your performance in the area of cost control. Actual Budgeted Variance Units Costs: 10,000 12,000 2,000 U Direct materials $358,800 Direct labor $414,600 Variable manufacturing overhead $216,000 Fixed manufacturing overhead Total costs $432,000 $73,200 F $518,400 $103,800 F $259,200 $43,200 F $450,000 $432,000 $18,000 U $1,439,400 $1,641,600 $202,200 F REQUIRED Prepare a variance analysis Note: Do not use negative signs with your answers. Static Budget Activity Variance Flexible Budget Flexible Budget Variance Units (in cases) 12,000 10,000 Actual 10,000 ✓ Static (Total) Variance Costs: Direct materials Direct labor Variable overhead $ $ 432,000 $ $ 504,000 x $ 360,000 * F…arrow_forwardBusiness Decision Case Porter Corporation has just hired Bill Harlow as its new controller. Al- though Harlow has had little formal accounting training, he professes to be highly experienced, having learned accounting “the hard way” in the field. At the end of his first month’s work, Harlow prepared the following performance report: PORTER CORPORATION Performance Report for the Month of June, 2018 Total Actual Costs Total Budgeted Costs Variances Direct materials............................ $216,630 $237,600 $20,970 F Direct labor ............................... 119,340 132,000 12,660 F Variable overhead ......................... 63,000 66,000 3,000 F Fixed overhead............................ 184,000 184,000 $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…arrow_forwardBusiness Decision Case Porter Corporation has just hired Bill Harlow as its new controller. Al- though Harlow has had little formal accounting training, he professes to be highly experienced, having learned accounting “the hard way” in the field. At the end of his first month’s work, Harlow prepared the following performance report: PORTER CORPORATION Performance Report for the Month of June, 2018 Total Actual Costs Total Budgeted Costs Variances Direct materials............................ $216,630 $237,600 $20,970 F Direct labor ............................... 119,340 132,000 12,660 F Variable overhead ......................... 63,000 66,000 3,000 F Fixed overhead............................ 184,000 184,000 $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…arrow_forward
- Several years ago, Westmont Corporation developed a comprehensive budgeting system for planning and control purposes. While departmental supervisors have been happy with the system, the factory manager has expressed considerable dissatisfaction with the information being generated by the system. A report for the company's Assembly Department for the month of March follows: Assembly DepartmentCost ReportFor the Month Ended March 31 Actual Results Planning Budget Variances Machine-hours 15,000 20,000 Variable costs: Supplies $ 8,700 $ 9,300 $ 600 F Scrap 29,400 31,500 2,100 F Indirect materials 86,600 102,000 15,400 F Fixed costs: Wages and salaries 75,100 71,000 4,100 U Equipment depreciation 101,000 101,000 0 Total cost $ 300,800 $ 314,800 $ 14,000 F After receiving a copy of this cost report, the supervisor of the Assembly Department stated, “These reports are super. It makes me feel really good to see how well things are going in my…arrow_forwardSeveral years ago, Westmont Corporation developed a comprehensive budgeting system for planning and control purposes. While departmental supervisors have been happy with the system, the factory manager has expressed considerable dissatisfaction with the information being generated by the system. A report for the company's Assembly Department for the month of March follows: Assembly DepartmentCost ReportFor the Month Ended March 31 Actual Results Planning Budget Variances Machine-hours 15,000 20,000 Variable costs: Supplies $ 11,400 $ 12,000 $ 600 F Scrap 42,000 45,000 3,000 F Indirect materials 119,000 142,500 23,500 F Fixed costs: Wages and salaries 85,900 80,000 5,900 U Equipment depreciation 110,000 110,000 0 Total cost $ 368,300 $ 389,500 $ 21,200 F After receiving a copy of this cost report, the supervisor of the Assembly Department stated, “These reports are super. It makes me feel really good to see how well things are…arrow_forwardSeveral years ago, Westmont Corporation developed a comprehensive budgeting system for planning and control purposes. While departmental supervisors have been happy with the system, the factory manager has expressed considerable dissatisfaction with the information being generated by the system. A report for the company's Assembly Department for the month of March follows: Assembly DepartmentCost ReportFor the Month Ended March 31 Actual Results Planning Budget Variances Machine-hours 25,000 30,000 Variable costs: Supplies $ 7,800 $ 8,400 $ 600 F Scrap 25,200 27,000 1,800 F Indirect materials 75,800 88,500 12,700 F Fixed costs: Wages and salaries 71,500 68,000 3,500 U Equipment depreciation 98,000 98,000 – Total cost $ 278,300 $ 289,900 $ 11,600 F After receiving a copy of this cost report, the supervisor of the Assembly Department stated, “These reports are super.…arrow_forward
- Several years ago, Westmont Corporation developed a comprehensive budgeting system for planning and control purposes. While departmental supervisors have been happy with the system, the factory manager has expressed considerable dissatisfaction with the information being generated by the system. A report for the company's Assembly Department for the month of March follows: Machine-hours Variable costs: Supplies Scrap Indirect materials. Fixed costs: Wages and salaries. Equipment depreciation Total cost Assembly Department Cost Report For the Month Ended March 31 Actual Results 15,000 Required 1 Required 2 Required 3 $ 9,900 35,000 101,000 Machine-hours (q) Supplies Scrap Indirect materials Wages and salaries Equipment depreciation Total After receiving a copy of this cost report, the supervisor of the Assembly Department stated, "These reports are super. It makes me feel really good to see how well things are going in my department. I can't understand why those people upstairs complain…arrow_forwardCritique a Variance Report The Terminator Inc. provides on-site residential pest extermination services. The company bas several mobile teams who are dispatched from a central location in company-owned trucks. The company uses the number of jobs to measure activity. At the beginning of April, the company budgeted for 100 jobs, but the actual number of jobs turned out to be 105. A report comparing the budgeted revenues and costs to the actual revenues and costs appears below: Required: Is the above variance report useful for evaluating how well revenues and costs were controlled during April? Why or Why not?arrow_forwardPreparing a Flexible Budget for Performance Reporting Suppose you receive the following performance report from the accounting department for your first month as plant manager for a new company. Your supervisor, the vice president of manufacturing, has concerns that the report does not provide an accurate picture of your performance in the area of cost control.arrow_forward
- Sunshine Goods Ltd is a revenue maximizing firm that engages in the analysis of variances to provide useful information to management. The company manufactures and sells three (3) products, RG, KC and MG. During July 2019 the following budgeted and actual results were presented to you the management accountant for analysis: Budgeted Results Product Total Sales $ Volume/units Price $ Contribution margin per unit $ Total contribution margin $ RG 585,000 900 650 820 738,000 KC 500,000 500 1,000 850 425,000 MG 300,000 600 500 720 432,000 Total 2,000 1,595,000 Actual Results Product Total Sales $ Volume/units Price $ Contribution margin per unit $ Total contribution margin $ RG 500,000 500 1,000 800 400,000 KC 270,000 300 900 `900 270,000 MG 105,000 350 300 700 245,000 Total 1,150 915,000 Required: Sales margin quantity…arrow_forwardSunshine Goods Ltd is a revenue maximizing firm that engages in the analysis of variances to provide useful information to management. The company manufactures and sells three (3) products, RG, KC and MG. During July 2019 the following budgeted and actual results were presented to you the management accountant for analysis: Budgeted Results Product Total Sales $ Volume/units Price $ Contribution margin per unit $ Total contribution margin $ RG 585,000 900 650 820 738,000 KC 500,000 500 1,000 850 425,000 MG 300,000 600 500 720 432,000 Total 2,000 1,595,000 Actual Results Product Total Sales $ Volume/units Price $ Contribution margin per unit $ Total contribution margin $ RG 500,000 500 1,000 800 400,000 KC 270,000 300 900 `900 270,000 MG 105,000 350 300 700 245,000 Total 1,150 915,000 Required: Sales margin price…arrow_forward1 Book References Problem 9-18 (Algo) Activity and Spending Variances (LO9-1, LO9-2, LO9-3) You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company's costing system and "do what you can to help us get better control of our manufacturing overhead costs" You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March: Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $16,500 $0.12 per nachine-hour $30,000+ 81.40 per machine-hour 50.70 per machine-hour $94,100 $1.70 per machine-hour $67,800 Actual Cost in March $ 21,180 $ 66,200 $ 16,600 $ 135,800 $ 69,500 During March, the company worked 22,000 machine-hours and produced…arrow_forward
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