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 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 $20,100; the fixed component of the budgeted utilities cost is $14,800.

Required:

2. Complete the performance report that will help Mr. Weston’s superiors assess how well costs were controlled in the machining department. (Round your intermediate calculations to 2 decimal places. 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 42,000 40,000 Direct labor wages $ 97,400 $ 94,000 $ 3,400 U Supplies 31,300 28,000 3,300 U Maintenance 26,800 24,100 2,700 U Utilities 24,500 22,700 1,800 U Supervision 61,000 61,000 0 Depreciation 107,000 107,000 0 Total $ 348,000 $ 336,800 $ 11,200 U

Explanation / Answer

Actual Results Revenue and spending variances Flexible budget Activity variances Planning budget Machine-hours 42000 42000 40000 Direct labor wages 97400 1300 F 98700 4700 U 94000 Supplies 31300 1900 U 29400 1400 U 28000 Maintenance 26800 2500 U 24300 200 U 24100 Utilities 24500 1300 U 23200 500 U 22700 Supervision 61000 0 None 61000 0 None 61000 Depreciation 107000 0 None 107000 0 None 107000 Total expenses 348000 4400 U 343600 6800 U 336800

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