Question: Timothy Hawkins superintendent of Kal Tubing Company s Machining Department is very

Timothy Hawkins, superintendent of Kal-Tubing Company’s Machining Department, is very happy with his performance report for the past month. The report follows:
When he received a copy of this report, Wayne Lockhart, the production manager, commented, “I’ve been getting these reports for months now, and I still can’t see how they help me assess efficiency and cost control in that department. I agree that the budget for the month was 26,250 machine-hours, but that represents 8,750 units of product, since it should take three hours to produce one unit. The department produced only 5,250 units during the month, and took 22,500 machine-hours to do it. Why do all the variances turn up favourable?”
1. In answer to Lockhart’s question, why are all the variances favourable? Is the performance report useful? Explain.
2. Prepare a new overhead performance report that will help Lockhart assess efficiency and cost control in the Machining Department. ( Hint : Exhibit 10–13 may be helpful in structuring your report.)

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