Question

Durham Company uses a responsibility reporting system. It has divisions in Denver, Seattle, and San Diego. Each division has three production departments: Cutting, Shaping, and Finishing. The responsibility for each department rests with a manager who reports to the division production manager. Each division manager reports to the vice president of production. There are also vice presidents for marketing and finance. All vice presidents report to the president.

In January 2020, controllable actual and budget manufacturing overhead cost data for the departments and divisions were as shown below.

Manufacturing Overhead		Actual		Budget
Individual costs—Cutting Department—Seattle
Indirect labor		$73,500		$69,800
Indirect materials		48,000		45,500
Maintenance		20,600		18,000
Utilities		20,200		16,600
Supervision		22,500		19,600
		$184,800		$169,500

Total costs
Shaping Department—Seattle		$158,200		$148,900
Finishing Department—Seattle		211,200		204,000
Denver division		678,500		673,400
San Diego division		721,600		714,900

Additional overhead costs were incurred as follows: Seattle division production manager—actual costs $52,100, budget $50,500; vice president of production—actual costs $65,200, budget $63,800; president—actual costs $76,700, budget $74,100. These expenses are not allocated.

The vice presidents who report to the president, other than the vice president of production, had the following expenses.

Vice President		Actual		Budget
Marketing		$133,300		$130,000
Finance		109,200		104,700

(a)

Prepare the Manufacturing overhead—Cutting Department manager—Seattle division responsibility report.

To Cutting Department Manager—Seattle Division							Month: January
Controllable Costs:		Budget		Actual		Favorable Unfavorable Neither Favorable nor Unfavorable
Direct LaborDirect MaterialsIndirect LaborIndirect MaterialsMaintenancePresidentSeattle Division Production ManagerSupervisionUtilitiesVice President of ProductionCuttingShapingFinishingSeattleDenverSan DiegoPrductionMarketingFinance		$		$		$	FavorableUnfavorableNeither Favorable nor Unfavorable
Direct LaborDirect MaterialsIndirect LaborIndirect MaterialsMaintenancePresidentSeattle Division Production ManagerSupervisionUtilitiesVice President of ProductionCuttingShapingFinishingSeattleDenverSan DiegoPrductionMarketingFinance							UnfavorableNeither Favorable nor UnfavorableFavorable
Direct LaborDirect MaterialsIndirect LaborIndirect MaterialsMaintenancePresidentSeattle Division Production ManagerSupervisionUtilitiesVice President of ProductionCuttingShapingFinishingSeattleDenverSan DiegoPrductionMarketingFinance							UnfavorableFavorableNeither Favorable nor Unfavorable
Direct LaborDirect MaterialsIndirect LaborIndirect MaterialsMaintenancePresidentSeattle Division Production ManagerSupervisionUtilitiesVice President of ProductionCuttingShapingFinishingSeattleDenverSan DiegoPrductionMarketingFinance							FavorableUnfavorableNeither Favorable nor Unfavorable
Direct LaborDirect MaterialsIndirect LaborIndirect MaterialsMaintenancePresidentSeattle Division Production ManagerSupervisionUtilitiesVice President of ProductionCuttingShapingFinishingSeattleDenverSan DiegoPrductionMarketingFinance							Neither Favorable nor UnfavorableUnfavorableFavorable
Total		$		$		$	Neither Favorable nor UnfavorableFavorableUnfavorable

Answer 1

To Cutting Department Manager—Seattle Division
Controllable Costs:	Budget	Actual
Indirect Labor	69800	73500	3700	Unfavorable
Indirect Materials	45500	48000	2500	Unfavorable
Maintenance	18000	20600	2600	Unfavorable
Utilities	16600	20200	3600	Unfavorable
Supervision	19600	22500	2900	Unfavorable
Total	169500	184800	15300	Unfavorable