Question

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	$	8,400	$	9,000	$	600	F
Scrap		28,000		30,000		2,000	F
Indirect materials		83,000		97,500		14,500	F
Fixed costs:
Wages and salaries		73,900		70,000		3,900	U
Equipment depreciation		100,000		100,000		–
Total cost	$	293,300	$	306,500	$	13,200	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.

Required:

3. Complete the new performance report for the quarter, based on Flexible Budget Performance approach.

Westmont Corporation
Assembly Department
Flexible Budget Performance Report
For the Month Ended March 31
	Actual Results			Flexible Budget			Planning Budget
Machine-hours (q)	25,000						30,000
Supplies	$8,400						$9,000
Scrap	28,000						30,000
Indirect materials	83,000						97,500
Wages and salaries	73,900						70,000
Equipment depreciation	100,000						100,000
Total	$293,300						$306,500

4. Were costs well controlled in March?

Answer 1

Westmont Corporation Assembly Department Flexible Budget Performance Report For the Month Ended March 31 Revenue and Spending Flexible Actual Results Variance Budget 25,000 25,000 Activity Variance Planning Budget 30,000 Machine-hours (9) U U $ Supplies ($0.30*9) Scrap ($1.00*q) Indirect materials ($3.25*9) Wages and salaries ($70,000) Equipment depreciation ($100,000) Total 8,400 $ 28,000 $ 83,000 $ 73,900 $ 100,000 $ 293,300 $ 900 3,000 1,750 3,900 - 9,550 7,500 $ 25,000 $ 81,250 $ 70,000 $ 100,000 $ 283,750 $ 1,500 F $ 5,000 F $ 16,250 F $ - None $ - None $ 22,750 F $ 9,000 30,000 97,500 70,000 100,000 306,500 U None $ $ $ $ No, the costs are not well controlled. Actual costs are higher than flexible budget