Ronald Davis, superintendent of Mason Company€™s Milling Department, is very happy with his performance report for the past month. The report follows:

Upon receiving a copy of this report, John Arnold, the production manager, commented, €œI€™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 35,000 machine-hours, but that represents 17,500 units of product, since it should take two hours to produce one unit. The department produced only 14,000 units during the month, and took 30,000 machine-hours to do it. Why do all the variances turn up favorable?€

Required:
1. In answer to Mr. Arnold€™s question, why are all the variances favorable? Evaluate the performance report.
2. Prepare a new overhead performance report that will help Mr. Arnold assess efficiency and cost control in the MillingDepartment.

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Mason Company Overhead Performance Report-MiⅢng Department Actual Budget Vanance Machine-hours 30,000 35,00 Variable manufacturing overhead: Indirect labor Utilities Supplies Maintenance S 19,700 50,800 59,500 12,600 14,000 24900 21,000 1300 F 8,700 F 1,400 F 3,100 F 28,00031 Total variable manufacturing ovemead 108000 122500 14500 F Fixed manufacturing overhead 52000 52000 Maintenance Supervision Depreciation 110,000110,000 0,000 80,000 Total fixed manufacturing overhead Total manufacturing overhead 242000 242 S 350,000 S364,500 S 14,500 F