Question

PROBLEM 1-5. Performance Reports [LO 1, 2] At the end of 2017, Cyril Fedako, CEO CFO for or th company's plant in Forest Lake, Minnesota Manufacturing Costs Forest Lake Plant Budget versus Actual 2017 Difference Budget Actual (Actual Minus Budget) $3,200,000 3,500,000 2.300,000 2,500,000 Materials Direct labor Supervisory salaries Utilities Machine maintenance Depreciation of building 475,000 125,000 350,000 90,000 250,000 220,000 $7,010,000 135,000 380,000 90,000 255,000 235,000 $7,595,000 $300,000 200,000 25,000 10,000 30,000 Depreciation of equipment Janitorial 5,000 15,000 $585,000 Total

Answer 1

Ans- Variable costs are directly proportional to production volume. So , all variable costs change in the same proportion as is the change in the production level. However, fixed costs are not affected by any increase in the production level. So Cyril should expect that all actual variable costs will be greater than expected and there will be no significant change in the fixed costs.

The only variable cost would expect to increase in given situation, following cost are the variable costs in the question:-

1-Materials, 2- Direct Labor

The fixed cost are remains same irrespective of volume of production hence it will not be change, following are the fixed costs in the given question.

1- Supervisory Salaries, 2-Utilities, 3- Machine Maintenance , 4- Depreciation of Building , 5- Janitorial, 6- Depreciation of Equipment.

(Machine Maintenance may be variable cost, its depend on its nature).