Question

Frank Weston, supervisor of the Freemont Corporation’s Machining Department, was visibly upset after being reprimanded for his department’s poor performance over the prior month. The department’s cost control report is given below:

Freemont Corporation–Machining Department Cost Control Report For the Month Ended June 30
	Actual Results			Planning Budget			Variances
Machine-hours		42,000			40,000
Direct labor wages	$	94,800		$	91,600		$	3,200	U
Supplies		30,300			27,200			3,100	U
Maintenance		26,200			23,700			2,500	U
Utilities		23,900			22,300			1,600	U
Supervision		59,000			59,000			0
Depreciation		103,000			103,000			0
Total	$	337,200		$	326,800		$	10,400	U

“I just can’t understand all of these unfavorable variances,” Weston complained to the supervisor of another department. “When the boss called me in, I thought he was going to give me a pat on the back because I know for a fact that my department worked more efficiently last month than it has ever worked before. Instead, he tore me apart. I thought for a minute that it might be over the supplies that were stolen out of our warehouse last month. But they only amounted to a couple of hundred dollars, and just look at this report. Everything is unfavorable.”

Direct labor wages and supplies are variable costs; supervision and depreciation are fixed costs; and maintenance and utilities are mixed costs. The fixed component of the budgeted maintenance cost is $19,300; the fixed component of the budgeted utilities cost is $14,600.

Freemont Corporation—Machining Department Flexible Budget Performance Report For the Month Ended June 30 Actual Results Flexible Budget Planning Budget Machine-hours 42,000 40,000 Direct labor wages $94,800 $91,600 Supplies 30,300 27,200 Maintenance 26,200 23,700 Utilities 23,900 22,300 Supervision 59,000 59,000 Depreciation 103,000 103,000 Total $337,200 $326,800

Answer 1

			Freemont Corporation -Machining Department
			Flexible Budget Performance Report
			For the Month ended June 30
			Actual	Spending variances		Flexible	Activity variances		Planning
			results			budget			Budget
Machine hours			42,000			42,000			40,000
Direct labor wages			94,800	1,380	F	96180	4,580	U	91,600
Supplies			30,300	1,740	U	28560	1,360	U	27,200
Maintenance			26,200	2,280	U	23920	220	U	23,700
Utilities			23,900	1,215	U	22685	385	U	22,300
Supervision			59,000	0	N	59,000	0	N	59,000
Depreciation			103,000	0	N	103,000	0	N	103,000
Total			337,200	3,855	U	333345	6,545	U	326,800