Carol Morgan manages the production division of Campbell Corporation. Ms. Morgan's responsibility report for the month of August follows: Controllable costs Raw materials Labor Maintenance Supplies Total Budget $18,900 11,024 3,300 1,950 $35,174 Actual $23,400 16,898 5,000 900 $46, 198 Variance $ 4,500 U 5,874 U 1,700 U 1,050 F $11,024 U The budget had called for 4,500 pounds of raw materials at $4.20 per pound, and 4,500 pounds were used during August; however, the purchasing department paid $5.20 per pound for the materials. The wage rate used to establish the budget was $20.80 per hour. On August 1, however, it increased to $23.80 as the result of an inflation index provision in the union contract. Furthermore, the purchasing department did not provide the materials needed in accordance with the production schedule, which forced Ms. Morgan to use 120 hours of overtime at a $35.70 rate. The projected 530 hours of labor in the budget would have been sufficient had it not been for the 120 hours of overtime. In other words, 650 hours of labor were used in August. Required . When confronted with the unfavorable variances in her responsibility report, Ms. Morgan argued that the report was unfair because it held her accountable for materials and labor variances that she did not control. Is she correct? . Calculate the variances of the items Ms. Morgan's controlled during the period.
Carol Morgan manages the production division of Campbell Corporation. Ms. Morgan's responsibility report for the month of August follows: Controllable costs Raw materials Labor Maintenance Supplies Total Budget $18,900 11,024 3,300 1,950 $35,174 Actual $23,400 16,898 5,000 900 $46, 198 Variance $ 4,500 U 5,874 U 1,700 U 1,050 F $11,024 U The budget had called for 4,500 pounds of raw materials at $4.20 per pound, and 4,500 pounds were used during August; however, the purchasing department paid $5.20 per pound for the materials. The wage rate used to establish the budget was $20.80 per hour. On August 1, however, it increased to $23.80 as the result of an inflation index provision in the union contract. Furthermore, the purchasing department did not provide the materials needed in accordance with the production schedule, which forced Ms. Morgan to use 120 hours of overtime at a $35.70 rate. The projected 530 hours of labor in the budget would have been sufficient had it not been for the 120 hours of overtime. In other words, 650 hours of labor were used in August. Required . When confronted with the unfavorable variances in her responsibility report, Ms. Morgan argued that the report was unfair because it held her accountable for materials and labor variances that she did not control. Is she correct? . Calculate the variances of the items Ms. Morgan's controlled during the period.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![**Production Analysis of Campbell Corporation - August Report**
**Responsibility Report Overview:**
Carol Morgan, who manages the production division of Campbell Corporation, received the following responsibility report for the month of August:
| Category | Budget | Actual | Variance |
|---------------------|---------|----------|----------|
| Controllable Costs | | | |
| Raw Materials | $18,900 | $23,400 | $4,500 U |
| Labor | $11,024 | $16,898 | $5,874 U |
| Maintenance | $3,300 | $5,000 | $1,700 U |
| Supplies | $1,950 | $900 | $1,050 F |
| **Total** | $35,174 | $46,198 | $11,024 U |
- **F = Favorable**, **U = Unfavorable**
**Budget Details:**
- **Raw Materials:** 4,500 pounds budgeted at $4.20/pound were procured at $5.20/pound.
- **Labor Costs:** The wage rate was initially $20.80/hour and increased to $23.80/hour due to an inflation index provision.
- **Labor Hours:** 120 hours of overtime were required at a $35.70 rate; exceeding the budgeted 530 hours, with a total of 650 hours used.
**Discussion Points:**
- **Requirement A:** Ms. Morgan challenged the fairness of the report, attributing the variances to factors beyond her control, specifically material and labor costs. Evaluate the correctness of her claim.
- **Requirement B:** Perform calculations to determine the variances for components under Ms. Morgan's direct control.
**Interactive Section:**
- **Question:** Was Ms. Morgan's argument about the report's fairness valid?
- **Input Box for User Response:** Is she correct or incorrect? [User Response]
These details summarize the financial performance for August and examine Ms. Morgan's control over budgetary outcomes, inviting users to explore accountability within corporate responsibility reporting.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8b2762f3-d482-43b3-ab6d-90531c56b146%2Fb85b8a90-4c49-4c62-84fc-b143d99cc698%2F2x2giex_processed.png&w=3840&q=75)
Transcribed Image Text:**Production Analysis of Campbell Corporation - August Report**
**Responsibility Report Overview:**
Carol Morgan, who manages the production division of Campbell Corporation, received the following responsibility report for the month of August:
| Category | Budget | Actual | Variance |
|---------------------|---------|----------|----------|
| Controllable Costs | | | |
| Raw Materials | $18,900 | $23,400 | $4,500 U |
| Labor | $11,024 | $16,898 | $5,874 U |
| Maintenance | $3,300 | $5,000 | $1,700 U |
| Supplies | $1,950 | $900 | $1,050 F |
| **Total** | $35,174 | $46,198 | $11,024 U |
- **F = Favorable**, **U = Unfavorable**
**Budget Details:**
- **Raw Materials:** 4,500 pounds budgeted at $4.20/pound were procured at $5.20/pound.
- **Labor Costs:** The wage rate was initially $20.80/hour and increased to $23.80/hour due to an inflation index provision.
- **Labor Hours:** 120 hours of overtime were required at a $35.70 rate; exceeding the budgeted 530 hours, with a total of 650 hours used.
**Discussion Points:**
- **Requirement A:** Ms. Morgan challenged the fairness of the report, attributing the variances to factors beyond her control, specifically material and labor costs. Evaluate the correctness of her claim.
- **Requirement B:** Perform calculations to determine the variances for components under Ms. Morgan's direct control.
**Interactive Section:**
- **Question:** Was Ms. Morgan's argument about the report's fairness valid?
- **Input Box for User Response:** Is she correct or incorrect? [User Response]
These details summarize the financial performance for August and examine Ms. Morgan's control over budgetary outcomes, inviting users to explore accountability within corporate responsibility reporting.
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