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Sagot :
Answer:
Westmont Corporation
1. One reason is that the actual results shows that budget performance was not more than 75% but the actual variable costs were more than 75%. Two, despite the above, the variance reports show a favorable outcome instead of an unfavorable one.
2. Using a flexible budget report will draw out better insight into the performance of the departmental supervisors and how they are controlling costs.
3. Assembly Department
Cost Report
For the Month Ended March 31
Actual Results Flexible Budget Variances
Machine-hours 15,000 20,000
Variable costs:
Supplies $9,300 $ 7,425 $1,875 U
Scrap 32,200 25,875 6,325 U
Indirect materials 93,800 83,250 10,550 U
Fixed costs:
Wages and salaries 77,500 73,000 4,500 U
Equipment depreciation 103,000 103,000 -
Total cost $315,800 $292,550 $23,250 U
4. The above report shows that costs were not well controlled in March. This contrasts with how performance was showed with the planning budget.
Explanation:
a) Data and Calculations:
Assembly Department
Cost Report
For the Month Ended March 31
Actual Results Planning Budget Variances
Machine-hours 15,000 20,000
Variable costs:
Supplies $9,300 $ 9,900 $600 F
Scrap 32,200 34,500 2,300 F
Indirect materials 93,800 111,000 17,200 F
Fixed costs:
Wages and salaries 77,500 73,000 4,500 U
Equipment depreciation 103,000 103,000 -
Total cost $315,800 $331,400 $15,600 F
Flexing the budget:
Machine-hours 15,000 20,000
Variable costs:
Supplies $9,900 *15,000/20,000 = $7,425
Scrap 34,500 *15,000/20,000 = $25,875
Indirect materials 111,000 *15,000/20,000 = $83,250
b) The flexible budget of the Assembly Department of Westmont Corporation shows that costs were overrun and overall variance was unfavorable unlike the report presented under the planning budget.
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