Campbell Corporation has four divisions: the assembly division, the processing d

Question

Campbell Corporation has four divisions: the assembly division, the processing division, the machining division, and the packing division. All four divisions are under the control of the vice president of manufacturing. Each division has a manager and several departments that are directed by supervisors. The chain of command runs downward from vice president to division manager to supervisor. The processing division is composed of the paint and finishing departments. The May responsibility reports for the supervisors of these departments follow:

*Campbell uses flexible budgets for performance evaluation.

Other pertinent cost data for May follow.

*Campbell uses flexible budgets for performance evaluation.

Required

Prepare a responsibility report for the manager of the processing division.

Prepare a responsibility report for the vice president of manufacturing.

Budgeted* Actual Variance Paint Department Controllable costs Raw materials $ 62,000 $ 65,000 $ 3,000 U Labor 59,700 68,000 8,300 U Repairs 6,800 5,670 1,130 F Maintenance 4,600 4,260 340 F Total $ 133,100 $ 142,930 $ 9,830 U Finishing Department Controllable costs Raw materials $ 50,000 $ 47,000 $ 3,000 F Labor 47,300 41,900 5,400 F Repairs 3,830 4,370 540 U Maintenance 2,880 3,650 770 U Total $ 104,010 $ 96,920 $ 7,090 F

Explanation / Answer

Total

F

Based on the above data analysis, in Paint department raw material & labour cost has been incurred over & above of budgeted amount, hence it is unfavourable. It is controllable cost the manager can ask supervisor for the same.

1.Processing division cost is not in favour, it means he has take action immediately why cost is incurred over and above of budgeted amount.

2.. Assembly division cost is in favour, it means he is working in good way.

3.Machining division cost is not in favour, it means he has take action immediately why cost is incurred over and above of budgeted amount.

4.Packing division cost is in favour, it means he is working in good way.

Report for the Vice Presidentr of Manufacturing-

221,600

Vice president of manufacturing

As per analysis of above data wa can say that overall cost for processing division manager is in favourable amount, so we can not raise question on divisional manager.
However we can see that actual cost of vice president of manufacturing is higher that the budgeted amount. so, president may ask question to vice president that why it is do higher. so that he can take action on that immediately that why budget amount exceeded this particular time & what corrective action has been take for that.

Report for the manager of processing division Budgeted Actual Variance unfavour/favour Paint Department Controllable costs Raw materials 62,000 65,000 3,000 U Labor 59,700 68,000 8,300 U Repairs 6,800 5,670 1,130 F Maintenance 4,600 4,260 340 F Total 133,100 142,930 9,830 U Finishing Department Controllable costs Raw materials 50,000 47,000 3,000 F Labor 47,300 41,900 5,400 F Repairs 3,830 4,370 540 U Maintenance 2,880 3,650 770 U

Total

104,010 96,920 7,090

F

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