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:   Assembly Department Cost Report For the Month Ended March 31   Actual Results Planning Budget Variances Machine-hours   25,000   30,000                       Variable costs:               Supplies $ 7,800 $ 8,400 $ 600 F Scrap   25,200   27,000   1,800 F Indirect materials   75,800   88,500   12,700 F Fixed costs:               Wages and salaries   71,500   68,000   3,500 U Equipment depreciation   98,000   98,000   –   Total cost $ 278,300 $ 289,900 $ 11,600 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.   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 ap

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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:

 

Assembly Department
Cost Report
For the Month Ended March 31
  Actual Results Planning Budget Variances
Machine-hours   25,000   30,000      
               
Variable costs:              
Supplies $ 7,800 $

8,400

$ 600 F
Scrap   25,200   27,000   1,800 F
Indirect materials   75,800   88,500   12,700 F
Fixed costs:              
Wages and salaries   71,500   68,000   3,500

U

Equipment depreciation   98,000   98,000    
Total cost $ 278,300 $ 289,900 $ 11,600 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.

 

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?

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