Frank Weston, supervisor of the Freemont CorporationAc€?cs Machining Department, was visibly upset after being reprimanded for his departmentAc€?cs poor performance over the prior month. The departmentAc€?cs cost control report is given below: Freemont CorporationAc€?oMachining Department Cost Control Report For the Month Ended June 30 Actual Results Planning Budget Variances Machine-Hours 42,000 40,000 Direct Labor Wages $89,600 86,800 2,800 U Supplies 28,300 25,600 2,700 U Maintenance 25,000 22,800 1,200 U Utilities 22,700 21,500 1,200 U Supervision 55,000 55,000 0 Depreciation 95,000 95,000 0 TOTAL 315,600 306,700 8,900 U
Ac€A?I just canAc€?ct understand all these unfavorable variances,Ac€?? Weston complained to the supervisor of another department. Ac€A?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.Ac€??
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 $17,700; the fixed component of the budgeted utilities cost is $14,200.
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2. Complete the performance report that will help Mr. WestonAc€?cs superiors assess how well costs were controlled in the machining department. (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 CorporationAc€?oMachining Department Flexible Budget Report For the Month Ending June 30 Actual Results Spending Variances Flexible Budget Activity Variances Planning Budget Direct Labor 89,600 86,800 Supplies 28,300 25,600 Maintenance 25,000 22,800 Utilities 22,700 21,500 Supervision 55,000 0 None 55,000 0 None 55,000 Depreciation 95,000 0 None 95,000 0 None 95,000 TOTAL 315,600 306,700