Flexible Budgets and Performance Evaluation

Presented is the January performance report for the Production Department of Nowwhat Company.

NOWWHAT COMPANY

Production Department Performance Report

For Month of January

Actual Budget Variance

Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 38,000

Manufacturing costs

Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $160,000 $152,000 $ 8,000 U

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295,000 228,000 67,000 U

Variable overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,000 114,000 48,000 U

Fixed overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000

38,000 2,000 F

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $653,000 $532,000 $121,000 U

Required

a. Evaluate the performance report.

b. Prepare a more appropriate performance repor