| Problem 9-23 Critiquing a Variance Report; Preparing aPerformance Report [LO1, LO4, LO6] Several years ago, Shipley Corporation developed a comprehensivebudgeting system for profit planning and control purposes. Whiledepartmental supervisors have been happy with the system, thefactory manager has expressed considerable dissatisfaction with theinformation being generated by the system. | | A typical departmental costreport for a recent period follows: | Assembly Department
Cost Report
For the Month Ended March 31 | | Planning
Budget | Actual
Results | Variances | | Machine-hours | | 32,000 | | 27,000 | | | | | Variable costs: | | | | | | | | | Supplies | $ | 9,600 | $ | 9,000 | $ | 600 | F | | Scrap | | 12,800 | | 11,800 | | 1,000 | F | | Indirect materials | | 54,400 | | 48,900 | | 5,500 | F | | Fixed costs: | | | | | | | | | Wages and salaries | | 50,000 | | 51,900 | | 1,900 | U | | Equipment depreciation | | 88,000 | | 88,000 | | â | | | | | | | | | | | Total cost | $ | 214,800 | $ | 209,600 | $ | 5,200 | F | | | | | | | | | | After receiving a copy of this costreport, the supervisor of the Assembly Department stated, âThesereports are super. It makes me feel really good to see how wellthings are going in my department. I canât understand why thosepeople upstairs complain so much about the reports.â | | For the last several years, thecompanyâs marketing department has chronically failed to meet thesales goals expressed in the companyâs monthly budgets. | | 1. | The companyâs president is uneasy about the cost reports, whatcan be the reason? (You may select morethan one answer. Single click the box with the question mark toproduce a check mark for a correct answer and double click the boxwith the question mark to empty the box for a wronganswer.) | | | | | Cost reports are effective asbudgeted costs at one level of activity is compared to actual costsat another level of activity | | Cost reports shows whether fixedcosts and variable costs are controlled | | Cost reports shows whether fixedcosts are controlled and do not show whether variable costs arecontrolled | | Cost reports are ineffective asbudgeted costs at one level of activity is compared to actual costsat another level of activity | | | 2. | What kind of reports should be used to give better insight intohow well departmental supervisors are controlling costs? | | | | | Fixed budget performance reportsmust be used | | Flexible budget performance reportsmust be used | | | 3. | Complete a new performance report for the quarter, based onanswer to (2) above. (Input all amounts as positive values.Leave no cells blank - be certain to enter "0" wherever required.Indicate the effect of each variance by selecting "F" forfavorable, "U" for unfavorable, and "None" for no effect (i.e.,zero variance). Round your intermediate calculations to 2 decimalplaces and final answers to the nearest dollar amount. Omit the "$"sign in your response.) |
Assembly Department
Performance Report
For the Month Ended March 31 | | Activity Variances | Budget | Revenue and Spending Variances | | Machine-hours | | | | | | | Supplies | $ | (Click to select)UFNone | $ | $ | (Click to select)UNoneF | | Scrap | | (Click to select)UFNone | | | (Click to select)UNoneF | Indirect materials | | (Click to select)FUNone | | | (Click to select)NoneUF | | Wages andsalaries | | (Click to select)UFNone | | | (Click to select)FUNone | | Equipmentdepreciation | | (Click to select)UNoneF | | | (Click to select)FNoneU | | | | | | | | Total | $ | (Click to select)UNoneF | $ | $ | (Click to select)UFNone | | | | | | | | |
