Carol Morgan manages the production division of Fanning Corporation. Ms. Morgan's responsibility report for the month of August follows: Budget Actual Variance Controllable costs Raw materials $22,140 10,584 4,100 2,100 $26,240 15,744 5,700 950 $4,100 U 5,160 U 1,600 U 1,150 F Labor Maintenance Supplies Total $38,924 $48,634 $9,710 U The budget had called for 4,100 pounds of raw materials at $5.40 per pound, and 4,100 pounds were used during August; however, the purchasing department paid $6.40 per pound for the materials. The wage rate used to establish the budget was $21.60 per hour. On August 1, however, it increased to $24.60 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 100 hours of overtime at a $36.90 rate. The projected 490 hours of labor in the budget would have been sufficient had it not been for the 100 hours of overtime. In other words, 590 hours of labor were used in August. Required a. 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? b. Calculate the variances of the items Ms. Morgan's controlled during the period. Complete this question by entering your answers in the tabs below. Required A Required B Calculate the variances of the items Ms. Morgan's controlled during the period. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Variances Total
Carol Morgan manages the production division of Fanning Corporation. Ms. Morgan's responsibility report for the month of August follows: Budget Actual Variance Controllable costs Raw materials $22,140 10,584 4,100 2,100 $26,240 15,744 5,700 950 $4,100 U 5,160 U 1,600 U 1,150 F Labor Maintenance Supplies Total $38,924 $48,634 $9,710 U The budget had called for 4,100 pounds of raw materials at $5.40 per pound, and 4,100 pounds were used during August; however, the purchasing department paid $6.40 per pound for the materials. The wage rate used to establish the budget was $21.60 per hour. On August 1, however, it increased to $24.60 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 100 hours of overtime at a $36.90 rate. The projected 490 hours of labor in the budget would have been sufficient had it not been for the 100 hours of overtime. In other words, 590 hours of labor were used in August. Required a. 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? b. Calculate the variances of the items Ms. Morgan's controlled during the period. Complete this question by entering your answers in the tabs below. Required A Required B Calculate the variances of the items Ms. Morgan's controlled during the period. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Variances Total
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Transcribed Image Text:Carol Morgan manages the production division of Fanning Corporation. Ms. Morgan's responsibility report for the month of August
follows:
Budget
Actual
Variance
Controllable costs
$22,140
10,584
4,100
2,100
$26,240
15,744
5,700
$4,100 U
5,160 U
1,600 U
1,150 F
Raw materials
Labor
Maintenance
Supplies
950
Total
$38,924
$48,634
$9,710 U
The budget had called for 4,100 pounds of raw materials at $5.40 per pound, and 4,100 pounds were used during August; however,
the purchasing department paid $6.40 per pound for the materials. The wage rate used to establish the budget was $21.60 per hour.
On August 1, however, it increased to $24.60 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 100 hours of overtime at a $36.90 rate. The projected 490 hours of labor in the budget would have been sufficient had it not been
for the 100 hours of overtime. In other words, 590 hours of labor were used in August.
Required
a. 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?
b. Calculate the variances of the items Ms. Morgan's controlled during the period.
Complete this question by entering your answers in the tabs below.
Required A
Required B
Calculate the variances of the items Ms. Morgan's controlled during the period. (Indicate the effect of each variance by
selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
Variances
Total
< Required A
Required B
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