You have been hired recently as the cost accountant for the consumer products division of ABC Manufacturing Company. The production manager of one of the product lines in this division has expressed concern and dismay over the nature of the periodic reports used to evaluate her performance. In a recent conversation with you she stated: €œI feel that the cost accounting reports used to evaluate the financial performance of my product line are misleading and unfair. I have been a line manager for over 15 years and, as such, know how to produce a good product! Because of competitive pressures, our line has even been able to cut raw material costs. It doesn€™t appear to me that the financial reports we get from accounting reflect these improvements. As well, the reports always contain only negative information€”what you guys call cost variances. I am frustrated that the managers above use these reports to evaluate my performance and the performance of my product line.€ Following is a typical report that is provided to the line manager in question:

Required
Identify and discuss at least three changes to the monthly performance report that would make the information in the report more informative and less threatening to the operating managers.
(CMAAdapted)

Transcribed Image Text:

ABC MANUFACTURING COMPANY Consumer Products Division Performance Report: Product Line X December 2010 Master Budget S15,390 $14,000 S25,680$24,500 Factory overhead S21,500 $20,000 S62,570 $58,500 Actual Cost Cost Variance $1,390U $1,180U $1,500U S4,070U Direct materials Direct labor Totals Note: Uunfavorable: F favorable