How do I verify that Harlows actual cost figures are correct? variances? Explain.and total standard costs equal the sum of all of theEXTENDING YOUR KNOWLETYK 10-1. Business Decision Case Porter Corporation has just hired Bill Harlow as its new controller. Al-though Harlow has had little formal accounting training, he professes to be highly experienced,Xhaving learned accounting "the hard way'" in the field. At the end of his first month's work, Harlowprepared the following performance report: Chapter 10 Standard Costing and Variance AnalysisPORTER CORPORATIONPerformance Reportfor the Month of June, 2018Total ActualTotal BudgetedCostsCostsVariances$237,600$20,970 F$216,630119,340Direct materials.12,660 FDirect labor.3,000 F..Variable overhead184,000Fixed overhead.$582,970$619,600 $36,630 FIn his presentation at Porter's month-end management meeting, Harlow indicated that thingswere going "fantastically." "The figures indicate," he said, "that the firm is beating its budget inall cost categories." This good news made everyone at the meeting happy and furthered Harlow'sacceptance as a member of the management team.After the management meeting, Susan Jones, Porter's general manager, asked you, as an inde-pendent consultant, to review Harlow's report. Jones' concern stemmed from the fact that Porter hasnever operated as favorably as Harlow's report seems to imply, and she cannot explain the apparentsignificant improvement.While reviewing Harlow's report, you are provided the following cost and operating data forJune: Porter has a monthly normal capacity of 11,000 direct labor hours or 8,800 units of product.Standard costs per unit for its only product are direct materials 3 pounds at $9 per pound; directlabor, 1.25 hours at $12 per hour; and variable overhead rate per direct labor hour of $6. DuringJune, Porter produced 8,000 units of product, using 24,900 pounds of materials costing $8.70 each,10,200 direct labor hours at an average rate of $11.70 each, and incurred variable overhead costs of$63,000 and fixed overhead costs of $184,000.After reviewing Porter's June cost data, you tell Harlow that his cost report contains a classicbudgeting error, and you explain how he can remedy it. In response to your suggestion, Harlowrevises his report as follows:66Total ActualTotal BudgetedCostsCostsVariancesDirect materials.$ 630 U$216,630119,340$216,000Direct labor.Variable overheadFixed overhead.n 000'$582,970$580,000$2,970 UHarlow's revised report is accompanied by remarks expressing regret at the oversight n ueoriginal report.RequiredIn your role as consultant,Verify that Harlow's actual cost figures are correct.b. Identify and explain the classic budgeting error that Harlow apparently incorporated into ieoriginal cost report.c. Explain why Harlow's revised figures could be considered deficient.a.Further analyze Harlow's revised variances, isolating underlying potential causal Taciod.How do your analyses indicate bases for concern to management?FYK10

Total Cost=Direct material+Direct labor+Variable Overhead+Fixed Overhead

Answered: How do I verify that Harlows actual…

Business

Accounting

How do I verify that Harlows actual cost figures are correct?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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