Data concerning manufacturing overhead for Wilson Audio are presented below. The packaging department is a cost centre.

An analysis of the overhead costs reveals that all variable costs are controllable by the manager of the packaging department, and, out of fixed costs, only 40% of supervisory costs are controllable at the department level. The flexible budget values and the cost and activity for the month of August while operating at 1,600 direct labour hours follows:

Flexible Budget Actual August Activity

Variable costs:

Indirect materials $2.00 $ 3,000

Indirect labour 3.00 4,500

Factory supplies 0.50 750

Fixed (including controllable and non-controllable) costs:

Depreciation $14,000 15,000

Supervision 20,000 19,000

Property taxes 14,000 12,000

Total costs $56,800 $54,250

Instructions

a) Prepare the responsibility reports for the packaging department for August. 12 marks

b) Comment on the manager's performance in controlling costs during the month. 3 marks