Question

P14-1 Budget performance report for a cost center Sneed Industries Company sells vehicle parts to manufacturers of heavy construction equip ment. The Crane Division is organized as a cost center. The budget for the Crane Division for the month ended August 31, 20Y6, is as follows (in thousands): Customer service salaries $ 250,000 Insurance and property taxes 50,000 Distribution salaries 475,000 Marketing salaries 300,000 Engineer salaries 740,000 Warehouse wages 280,000 Equipment depreciation 155,000 Total $2,250,000

Answer 1

1.

Particular	Budgeted Cost	Actual Cost	Variance
Customer Service Salaries	$        2,50,000	$          3,68,000	$       -1,18,000	Adverse
Insurance and Property Taxes	$           50,000	$             49,100	$                 900	Favorable
Distribution Salaries	$        4,75,000	$          4,69,500	$              5,500	Favorable
Marketing Salaries	$        3,00,000	$          3,71,000	$          -71,000	Adverse
Engineer Salaries	$        7,40,000	$          7,38,250	$              1,750	Favorable
Warehouse Wages	$        2,80,000	$          2,74,900	$              5,100	Favorable
Equipment Depreciation	$        1,55,000	$          1,55,000	$                    -
Total	$     22,50,000	$        24,25,750	$       -1,75,750

2.
Director might be expected to request supplemental reports for Customer Service Salaries and Marketing Salaries since there is large adverse variance.