Question

Problem 9-26 (Algo) Critiquing a Cost Report; Preparing a Performance Report (LO9-1, LO9-2, LO9-3, LO9-4, LO9-6] 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 Actual Planning Results Budget Variances Machine-hours 42,000 40,000 Direct labor wages Supplies Maintenance Utilities Supervision Depreciation Total $ 72,700 21,800 22, 200 19,900 42,000 69,000 $ 247,600 $ 71,200 20,400 20,100 18,900 42,000 69,000 $241,600 $1,500 U 1,400 U 2,100 U 1,000 U 0 $6,000 U "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 $12,500; the fixed component of the budgeted utilities cost is $12,900.

Answer 1

Flexible budget performance report

For the month ended June 30

	Actual results	Spending variance	Flexible budget	activity variance	Planning budget
Labor hour	42000		42000		40000
Direct labor wages	72700	2060 F	74760	3560 U	71200
Supplies	21800	380 U	21420	1020 U	20400
Maintenance	22200	1720 U	20480	380 U	20100
Utilities	19900	700 U	19200	300 U	18900
Supervision	42000	0 None	42000	0 None	42000
Depreciation	69000	0 None	69000	0 None	69000
Total	247600	740 U	246860	5260 U	241600