Many years ago shipley corporation developed comprehensive

Reference no: EM13393088

Many years ago, Shipley Corporation developed comprehensive budgeting system for profit planning and control purposes. While departmental supervisors have been happy with 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:

	A	B	C	D	E
1	Assembly Department
2	Cost Report
3	For the Month Ended March 31
4
5		Planning Budget	Actual Results	Variances
6	Machine-hours	30,000	25,000
7
8	Variable costs:
9	Supplies	$6,000	$5,400	$600	F
10	Scrap	15,000	14,000	1,000	F
11	Indirect Materials	52,500	47,000	1,000	F
12	Fixed costs:
13	Wages and salaries	60,000	61,900	1,900	U
14	Equipment depreciation	90,000	90,000
15	Total Cost	$223,500	218,300	$5,200	F

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 on 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 report 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. How well were costs controlled in the Assembly Department in March?

Reference no: EM13393088

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