Frank Weston, supervisor of the Freemont Corporation’s Machining Department, was

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:

“I just can’t understand all 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 $95,700; the fixed component of the budgeted utilities cost is $12,400.

Required:

2. Complete the performance report that will help Mr. Weston’s superiors assess how well costs were controlled in the machining department. (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.)

Freemont Corporation–Machining Department
Cost Control Report
For the Month Ended June 30 Actual Results Planning Budget Variances Machine-hours 34,000 31,000 Direct labor wages $ 70,900 $ 65,100 $ 5,800 U Supplies 20,700 18,600 2,100 U Maintenance 139,100 136,000 3,100 U Utilities 16,100 15,500 600 U Supervision 34,000 34,000 0 Depreciation 84,000 84,000 0 Total $ 364,800 $ 353,200 $ 11,600 U

Explanation / Answer

Actual Spending variances Flexible budget Activity variances Planning budget Machine-hours 34000 34000 31000 Direct labor wages 70900 500 F 71400 6300 U 65100 Supplies 20700 300 U 20400 1800 U 18600 Maintenance 139100 800 F 139900 3900 U 136000 Utilities 16100 300 U 15800 300 U 15500 Supervision 34000 0 None 34000 0 None 34000 Depreciation 84000 0 None 84000 0 None 84000 Total 364800 700 F 365500 12300 U 353200

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