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Several years ago, Shipley Corporation developed a comprehensive budgeting system for profit planning and control purposes. While departmental supervisors have been happy with the system, the factory manager has expressed considerable dissatisfaction with the information being generated by the system. A typical departmental cost report for a recent period follows:
After receiving a copy of this cost report, the supervisor of the Assembly Department stated, These reports are super. It makes me feel really good to see how well things are going in my department. I can't understand why those people upstairs complain so much about the reports. For the last several years, the company's marketing department has chronically failed to meet the sales goals expressed in the company's monthly budgets.
Required:
1. The company's president is uneasy about the cost reports and would like you to evaluate their usefulness to the company. 2. What changes, if any, should be made in the reports to give better insight into how well departmental supervisors are controlling costs? 3. Prepare a new performance report for the quarter, incorporating any changes you suggested in question (2) above. 4. How well were costs controlled in the Assembly Department in March?
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