managerial accounting flexible budget performance report


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
Planning
Budget Actual
Results Variances
Machine-hours 34,600 36,600
Direct labor wage $79,580 $86,200 $6,620 U
Supplies 17,300 23,500 6,200 U
Maintenance 119,600 139,000 19,400 U
Utilities 14,560 15,800 1,240 U
Supervision 38,000 38,000 0
Depreciation 80,000 80,000 0


Total $349,040 $382,500 $33,460 U



"I just can't understand all the red ink," 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 $85,000; the fixed component of the budgeted utilities cost is $11,100.

Required:
Prepare a performance report that will help Mr. Weston's superiors assess how well costs were controlled in the Machining Department. (Leave no cells blank - be certain to enter "0" wherever required. 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. Omit the "$" sign in your response.)

Freemont Corporation−Machining Department
Flexible Budget Performance Report
For the Month Ended June 30
Activity Variances Spending Variances
Direct labor wages $ ? $ ?
Supplies ?
Maintenance ?
Utilities ?
Supervision ?
Depreciation ?

Total $ ? $ ?

Fill in all ? Slots .

Thank you

Typical stupid academic question; these are imputs! What's missing here is any indication of output by which activities might be judged.

By the way, we don't fill in the slots, we will review your work for you but you must put pen to paper

I don't know were to start. I know that Supervision and Depreciation will be zero for both activity variances and spending variances, but after that I'm lost.

all the information you have is in the table above all the actual are all over budget which are negative or over budget variances; analyse on a unit basis, divide the costs by the machine hours and see what that gives. You you have been give data on fixed and variable costs, so split the costs into fixed and variable and calculate variable cost per machine hour and the variance. You must learn to think