Several years ago, Westmont Corporation developed a comprehensive budgeting syst

Question

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 dissatisfaction with the information being generated by the system. A typical departmental cost report for a recent period follows: Cost Report For the Month Ended March 31 Planning Actual Results Budget Variances 35,000 40,000 Variable costs: Supplies Scrap Indirect materials $ 33,500 S36,000 $2,500 F 300 F 52,000 4,400F 19,700 47,600 20,000 Fixed costs: 81,250 62 750 F 82,000 62,000 Wages and salaries Total cost $ 244,050 S 252,000 $7,950 F After receiving a copy of this cost report, the supervisor of the Assembly Department stated, "These reports are super. It makes me feel really 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 chronically failed to meet the sales goals expressed in the company's monthly budgets 3. Complete the new performance report for the quarter, based on Flexible Budget Performance approach. (Indicate the effect of each variance by selecting "F" for favorable, " for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Flexible Budget Performance Report For the Month Ended March 31 Actual Results Spending Variances Flexible Budget Activity Variances Planning Budget Supplies Scrap Indirect materials Wages and salaries 35,000 S 33,500 19,700 47,600 81,250 62,000 S 244,050 40,000 $ 36,000 20,000 52,000 82,000 62,000 $ 252,000 one Total

Explanation / Answer

Flexible budget performance report :

Actual results Spending variance Flexible budget Activity variance Planning budget Machine hour 35000 35000 40000 Supplies 33500 2000 U 31500 4500 F 36000 Scrap 19700 2200 U 17500 2500 F 20000 Indirect material 47600 2100 U 45500 6500 F 52000 Wages and salary 81250 750 F 82000 None 82000 Equipment dep 62000 None 62000 None 62000 TOtal 244050 5550 U 238500 13500 F 252000

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