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, €œThese 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 inMarch?

Transcribed Image Text:

Assembly Department Cost Report For the Month Ended March 31 2 4 Planning Actual Budget Rs Variances Budget Results 6 Machine-hours 0,000 25,000 8 Variable costs 9 Supplies 10 Scrap 11 Indirect materials 12 Fixed costs S 6000 5400 600 F 15,00014,000 2,5007005,500 F 1,000 F Wages and salaries 14 Equipment depreciation 15 Total cost 13 Woueomens sesnce500009 0019000 S 223.500 218300 5,200F 90,000 90,000 HSheeti Sheet2Sheet3