Bulldog Inc. is a large manufacturing company that runs its own electrical power plant from the excess
Question:
The budgeted monthly costs of producing power, based on normal usage of 100,000,000 kWh, are $30,500,000 in fixed costs and $8,000,000 in variable costs. For November, the actual kWh used was 60,000,000 by Department A and 20,000,000 by Department B. Actual fixed costs were $30,500,000, and actual variable costs were $8,000,000.
Terry Lamb, the controller, prepared the following monthly report:
Lamb fully allocated all power plant costs on the basis of actual kilowatt-hours used by each production department. This report will be submitted to the two production department operating managers.
REQUIRED
1. Discuss at least two problems with the monthly allocation report prepared by Lamb for November 2014 at Bulldog Inc.
2. Prepare a revised monthly allocation report for November 2014 using a flexible-budget approach.
3. Discuss the behavioural implications of Lambs monthly allocation report for November 2014 on the production managers of Department B at Bulldog Inc.
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Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0133392883
6th Canadian edition
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ
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