Question

Problem 9-25 Crltiquing a Varlance Report, Preparing a Performance Report fLO9-1, LO9-2, LO9-3, LO9. 4, LO9-6)] 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 dissstisfaction with the informstion being generated by the system. A report for the compsny's Assembly Department for the month of March follows: Cost Recport For the Month Ended March 31 Actual Planning Rcsults Budget Variances 25,8 3,eee Machinc-hours Variable costs: Supplics 2,80e F 28,8ee 83,8 97,580 14,58e F 3e,80e Indirect materials Fixed costs: Hages and salaries Equipment depreciation Total cost 73,90 7e,e 3,900 U 293,3ee $386,588 $13,288 After receiving a copy of this cost report, the supervisor of the Assembly Department stated, "These reports are super. It makes me feel reslly 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 chronicelly failed to meet the sales gosls expressed in the company's monthly budgets. Required: 1. The company's president is unessy 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 approsch. 4. Were costs well controlled in March? Complete this question by entering your answers in the tabs below. Required 1 Required 2Required 3Required 4 prepare a new performance report for the quarter, (Do not round your intermediate calculations. Indicate the effect of each variance by selecting-F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Assembly Department Flexlble Budget Pertormance R 8 Report For the Month Ended March 31 Actual Flexlble Budget Pla s (q) 25,000 30,000 Supplies Scrap Indirect materials Wages and salaries S B.400 28,000 83,000 73,900 100,000 S 9,000 30,000 97,500 70,000 100,000 Total S 293

Answer 1

Solution 1:

The company's president is uneasy with cost reports because:

1. Cost report is not having same level of comparison for actual and budget.

2. Cost report is showing cost under control as actual cost is lower than planning cost, however planning cost are based on 30000 machine hours and actual cost is based on 25000 machine hours

Solution 2:

Flexible budget performance report give better insight how well departmental supervisor controlling costs.

Solution 3:

Westmont Corporation
Assembly Department
Flexible Budget Performance Report
For the month ended March 31
Particulars	Actual results	Flexible Budget Variance		Flexible Budget	Activity Variance		Planning Budget
Machine hours	25000			25000			30000
Supplies	$8,400.00	$900.00	U	$7,500.00	$1,500.00	F	$9,000.00
Scrap	$28,000.00	$3,000.00	U	$25,000.00	$5,000.00	F	$30,000.00
Indirect materials	$83,000.00	$1,750.00	U	$81,250.00	$16,250.00	F	$97,500.00
Wages and Salaries	$73,900.00	$3,900.00	U	$70,000.00	$0.00	None	$70,000.00
Equipment Depreciation	$100,000.00	$0.00	None	$100,000.00	$0.00	None	$100,000.00
Total	$293,300.00	$9,550.00	U	$283,750.00	$22,750.00	F	$306,500.00

Solution 4:

AS flexible budget variance in unfavorable, it means costs were not properly controlled in march.