Several years ago, Westmont Company developed a comprehensive budgeting system for profit planning and control purposes. The line supervisors have been very happy with the system and with the reports being prepared on their performance, but both middle and upper management have expressed considerable dissatisfaction with the information being generated by the system. A typical manufacturing overhead performance report for a recent period is shown below:

After receiving a copy of this overhead performance 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 in my department. I can’t understand why those people upstairs complain so much.’ The budget data above are for the original planned level of activity for the quarter.

Required
1. The company’s managing director is uneasy about the performance reports being prepared and would like you to evaluate their usefulness to the company.
2. What changes, if any, would you recommend be made in the overhead performance report above in order to give better insight into how well the supervisor is controlling costs?
3. Prepare a new overhead performance report for the quarter. (Include both the variable and the fixed costs in your report.)

Transcribed Image Text:

Westmont Company Overhead performance report- Assembly Department for the quarter ended 31 March Machine-hours Variable overhead costs: Indirect materials Rework time Utilities Machine set-up Total variable overhead cost Fixed overhead costs: Maintenance Inspection Total fixed overhead cost Total overhead cost Actual 35,000 £29,700 7,900 51,800 11,600 101,000 79,200 60,000 139,200 £240,200 Budgeted 40,000 £32,000 8,000 56,000 12,000 108,000 80,000 60,000 140,000 £248,000 Variance £2,300 F 100 F 4,200 F 400 F 7,000 F 800 F 800 F £7,800 F