MANAGERIAL ACCOUNTING
16th Edition
ISBN: 9781260901320
Author: Garrison
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 9, Problem 26P
PROBLEM 9-26 Critiquing a Cost Report; Preparing a Performance Report LO9-1, LO9-2, LO9-3, LO9-4, LO9-6
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 | 38,000 |
35,000 | |
| Direct labor wages | $86,100 |
$ 80,500 | $5,600 U |
| Supplies | 23,100 |
21,000 | 2,100 U |
| Maintenance | 137,300 |
134,000 | 3,300 U |
| Utilities | 15,700 |
15,200 | 500 U |
| Supervision | 38,000 |
38,000 | 0 |
80.000 |
80.000 | 0 | |
| Total | $380,200 |
$368,700 | $11,500 U |
1 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 $92,000: the fixed component of the budgeted utilities cost is $ 11.700.
Required:
- Evaluate the company's cost control report and explain why the variances were all unfavorable.
- Using Exhibit 9-8 as your guide, prepare a performance report that will help Mr. Weston’s superiors assess how well costs were controlled in the Machining Department.
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Students have asked these similar questions
Problem 9-23 (Algo) Critiquing a Cost Report; Preparing a Performance Report (LO9-1, LO9-2, LO9-3,
LO9-4)
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
Freenont Corporation-Machining Departnent
Cost Control Report
For the Month Ended June 30
Actual
Results
42,000
$ 85,700
26, B00
25,200
22,900
52,000
89,000
$301,600
Planning
Budget
40,000
$ 83,200
24, 400
22,100
20,900
52,000
19,000
$ 291,600
Variances
Machine-hours
Direct labor wages
Supplies
Maintenance
Utilities
Supervision
$2,500 U
2,400 U
3, 100 U
2,000 U
Depreciation
Total
$ 10,000 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…
Pareto Chart and Cost of Quality Report for a Manufacturing Company
The president of Mission Inc. has been concerned about the growth in costs over the last several years. The president asked the controller to perform an activity analysis to gain a better insight into these costs. The result of the activity analysis is summarized as follows:
Activities
Activity Cost
Correcting invoice errors
$11,250
Disposing of incoming materials with poor quality
9,000
Disposing of scrap
31,500
Expediting late production
27,000
Final inspection
22,500
Inspecting incoming materials
4,500
Inspecting work in process
22,500
Preventive machine maintenance
15,750
Producing product
67,500
Responding to customer quality complaints
13,500
Total
$225,000
The production process is complicated by quality problems, requiring the production manager to expedite production and dispose of scrap.
Required:
1. On paper or in a spreadsheet program, prepare a Pareto chart for each of the…
7-7 Calculating traditional and ABC overhead rates (LO 2) Eric Parker has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company's approach to allocating overhead to products based on machine hours. The current department overhead budget of $1,140,000 is based on 40,000 machine hours. In an initial analysis of overhead costs, Eric has identified the following activity cost pools.
Cost Pool
Expected Cost
Expected Activities
Product assembly
$ 600,000
40,000 machine hours
Machine setup and calibration
320,000
2,000 setups
Product inspection
90,000
1,500 batches
Raw materials storage
130,000
500,000 pounds
$1,140,000
Required
a.Calculate the company's overhead rate based on machine hours.
b.Calculate the company's overhead rates using the proposed activity-based costing pools.
Chapter 9 Solutions
MANAGERIAL ACCOUNTING
Ch. 9 - Prob. 1QCh. 9 - What is a flexible budget and how does it differ...Ch. 9 - Prob. 3QCh. 9 - Why is it difficult to interpret a difference...Ch. 9 - What is an activity variance and what does it...Ch. 9 - What is a revenue variance and what does it mean?Ch. 9 - 9-7 What is a spending variance and what does it...Ch. 9 - 9-8 What does a flexible budget performance report...Ch. 9 - How does a flexible budget based on two cost...Ch. 9 - 9-10 What assumption is implicitly made about cost...
Ch. 9 - 9-11 What assumption is implicitly made about cost...Ch. 9 - The Excel worksheet form that appears below is to...Ch. 9 - The Excel worksheet form that appears below is to...Ch. 9 - Adger Corporation is a service company that...Ch. 9 - Prob. 2F15Ch. 9 - Prob. 3F15Ch. 9 - Adger Corporation is a service company that...Ch. 9 - Adger Corporation is a service company that...Ch. 9 - Adger Corporation is a service company that...Ch. 9 -
L09-1, LO9-2, LO9-3
Adger Corporation is a...Ch. 9 - Prob. 8F15Ch. 9 - Adger Corporation is a service company that...Ch. 9 - Prob. 10F15Ch. 9 - Prob. 11F15Ch. 9 - Prob. 12F15Ch. 9 - Prob. 13F15Ch. 9 - Prob. 14F15Ch. 9 - Prob. 15F15Ch. 9 - Prob. 1ECh. 9 - Prob. 2ECh. 9 -
EXERCISE 9-3 Revenue and Spending Variances...Ch. 9 - Prob. 4ECh. 9 - Prob. 5ECh. 9 - EXERCISE 9-6 Critique a Variance ReportLO9-6 The...Ch. 9 - Prob. 7ECh. 9 - EXERCISE 9-8 Flexible Budgets and Activity...Ch. 9 - Fixed Cost...Ch. 9 - ...Ch. 9 -
EXERCISE 9-11 Flexible Budget L09-1
Refer to the...Ch. 9 - EXERCISE 9-12 Activity Variances LO9-2
Refer to...Ch. 9 - ...Ch. 9 -
EXERCISE 9-14 Prepare a Flexible Budget...Ch. 9 - Prob. 15ECh. 9 -
EXERCISE 9-16 Flexible Budgets and Revenue and...Ch. 9 - EXERCISE 9-17 Flexible Budget Performance Report...Ch. 9 - Prob. 18ECh. 9 - PROBLEM 919: Flexible Budget Performance Reports;...Ch. 9 -
PROBLEM 9-20 Activity and Spending Variances...Ch. 9 - Prob. 21PCh. 9 - Prob. 22PCh. 9 - Prob. 23PCh. 9 -
PROBLEM 9-24 Critiquing a Report; Preparing a...Ch. 9 -
PROBLEM 9-25 Critiquing a Variance Report;...Ch. 9 - PROBLEM 9-26 Critiquing a Cost Report; Preparing a...Ch. 9 - Prob. 27CCh. 9 - ...Ch. 9 - Prob. 29C
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