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Question:78 Several years ago, Shipley Corporation developed a comprehensive budgeting system for profit 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 typical departmental cost report for a recent period follows: Assembly Department Cost Report For the Month Ended March 31 Planning Budget Actual Results Variances 34,000 29,000 Machine-hours Variable costs: Supplies 6,800 6,200 600 F Scrap 13,600 12,600 1,000 F Indirect materials 56,100 50,600 5,500 F Fixed costs: Wages and salaries Equipment depreciation Total cost 50,000 51,900 1,900 U 86,000 86,000 - 2,12,500 2.07,300 5,200 F 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. The company's president is uneasy about the cost reports, what can be the reason?a. Cost reports are effective as budgeted costs at one level of activity are compared to actual costs at another level of activity.b. Cost reports are ineffective as budgeted costs at one level of activity are compared to actual costs at another level of activity.c. Cost reports show whether fixed costs and variable costs are controlled.d. Cost reports show whether fixed costs are controlled and do not show whether variable costs are controlled.

Question:78 Several years ago, Shipley Corporation developed a comprehensive budgeting system for profit 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 typical departmental cost report for a recent period follows: Assembly Department Cost Report For the Month Ended March 31 Planning Budget Actual Results Variances 34,000 29,000 Machine-hours Variable costs: Supplies 6,800 6,200 600 F Scrap 13,600 12,600 1,000 F Indirect materials 56,100 50,600 5,500 F Fixed costs: Wages and salaries Equipment depreciation Total cost 50,000 51,900 1,900 U 86,000 86,000 - 2,12,500 2.07,300 5,200 F 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. The company's president is uneasy about the cost reports, what can be the reason?a. Cost reports are effective as budgeted costs at one level of activity are compared to actual costs at another level of activity.b. Cost reports are ineffective as budgeted costs at one level of activity are compared to actual costs at another level of activity.c. Cost reports show whether fixed costs and variable costs are controlled.d. Cost reports show whether fixed costs are controlled and do not show whether variable costs are controlled.

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 1PB
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Question:78 Several years ago, Shipley Corporation developed a comprehensive budgeting system for profit 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 typical departmental cost report for a recent period follows: Assembly Department Cost Report For the Month Ended March 31 Planning Budget Actual Results Variances 34,000 29,000 Machine-hours Variable costs: Supplies 6,800 6,200 600 F Scrap 13,600 12,600 1,000 F Indirect materials 56,100 50,600 5,500 F Fixed costs: Wages and salaries Equipment depreciation Total cost 50,000 51,900 1,900 U 86,000 86,000 - 2,12,500 2.07,300 5,200 F 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. The company's president is uneasy about the cost reports, what can be the reason?a. Cost reports are effective as budgeted costs at one level of activity are compared to actual costs at another level of activity.b. Cost reports are ineffective as budgeted costs at one level of activity are compared to actual costs at another level of activity.c. Cost reports show whether fixed costs and variable costs are controlled.d. Cost reports show whether fixed costs are controlled and do not show whether variable costs are controlled.
Transcribed Image Text:Question:78 Several years ago, Shipley Corporation developed a comprehensive budgeting system for profit 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 typical departmental cost report for a recent period follows: Assembly Department Cost Report For the Month Ended March 31 Planning Budget Actual Results Variances 34,000 29,000 Machine-hours Variable costs: Supplies 6,800 6,200 600 F Scrap 13,600 12,600 1,000 F Indirect materials 56,100 50,600 5,500 F Fixed costs: Wages and salaries Equipment depreciation Total cost 50,000 51,900 1,900 U 86,000 86,000 - 2,12,500 2.07,300 5,200 F 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. The company's president is uneasy about the cost reports, what can be the reason?a. Cost reports are effective as budgeted costs at one level of activity are compared to actual costs at another level of activity.b. Cost reports are ineffective as budgeted costs at one level of activity are compared to actual costs at another level of activity.c. Cost reports show whether fixed costs and variable costs are controlled.d. Cost reports show whether fixed costs are controlled and do not show whether variable costs are controlled.
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