everal 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 $ 9,900 35,000 101,000 79,900 105,000 $ 330,800 Planning Budget 20,000 $ 10,500 37,500 120,000 Variances $600 F 2,500 F 19,000 F 75,000 105,000 $ 348,000 $ 17,200 F 4,900 U 0 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 so much about the reports." For the last several years, the company's marketing department has chronically failed to meet the sales goals expressed in the company's monthly budgets. Required: 1. The company's president is uneasy about the cost reports, identify at least two reasons. 2. What kind of reports should be used to give better insight into how well departmental supervisors are controlling costs? 3. Complete the new performance report for the quarter, based on Flexible Budget Performance approach. 4. Were costs well controlled in March?
everal 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 $ 9,900 35,000 101,000 79,900 105,000 $ 330,800 Planning Budget 20,000 $ 10,500 37,500 120,000 Variances $600 F 2,500 F 19,000 F 75,000 105,000 $ 348,000 $ 17,200 F 4,900 U 0 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 so much about the reports." For the last several years, the company's marketing department has chronically failed to meet the sales goals expressed in the company's monthly budgets. Required: 1. The company's president is uneasy about the cost reports, identify at least two reasons. 2. What kind of reports should be used to give better insight into how well departmental supervisors are controlling costs? 3. Complete the new performance report for the quarter, based on Flexible Budget Performance approach. 4. Were costs well controlled in March?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text: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 so much
about the reports."
For the last several years, the company's marketing department has chronically failed to meet the sales goals expressed in the
company's monthly budgets.
Actual
Results
Planning
Budget
20,000
Required:
1. The company's president is uneasy about the cost reports, identify at least two reasons.
2. What kind of reports should be used to give better insight into how well departmental supervisors are controlling costs?
15,000
9,900
35,000
101,000
79,900
105,000
$330,800
$ 10,500
37,500
120,000
3. Complete the new performance report for the quarter, based on Flexible Budget Performance approach.
4. Were costs well controlled in March?
$
79,900
75,000
105,000
4,900 U
0
105,000
$ 330,800 $ 348,000 $ 17,200 F
Complete this question by entering your answers in the tabs below.
Variances
$ 600 F
2,500 F
19,000 F
Required 4
Complete the new performance report for the quarter, based on Flexible Budget Performance approach.
Note: Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and
"None" for no effect (i.e., zero variance). Input all amounts as positive values.
U
U
U
U
None
U
Westmont Corporation
Assembly Department
Flexible Budget Performance Report
For the Month Ended March 31
Revenue and Spending Flexible
Variances
Budget
15,000
< Required 2
Activity Variances
Required 4 >
F
F
F
None
None
F
Planning
Budget
20,000
10,500
37,500
120,000
75,000
105,000
$ 348,000
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