Question

The budget for Department 6 of Cardinal Company for the current month ending March 31 is as follows:
Materials $208,000
Factory wages 265,000
Supervisory salaries 67,800
Depreciation of plant and equipment 35,000
Power and light 22,500
Insurance and property taxes 15,500
Maintenance 9,700
During March, the costs incurred in Department 6 of Cardinal Company were materials, $204,000; factory wages, $285,000; supervisory salaries, $63,600; depreciation of plant and equipment, $35,000; power and light, $21,360; insurance and property taxes, $14,400; maintenance, $9,456.
(a) Prepare a budget performance report for the supervisor of Department 6 of Cardinal Company for the month of March.
(b) Are there any significant variances (5% or greater) of the budgeted amounts that should be examined by the supervisor?

Answer 1

Answer:

a) Cardinal Company, department 6

Budget performance report

For the month ended march 31, 202x

                                 Budget            Actual               Over           Under

                                                                                   budget        budget

Materials                $208,000         $204,000                              $4,000

Factory wages       $265,000         $285,000       ($20,000)

Supervisory salaries $67,800           $63,600                              $4,200

Depreciation P&E     $35,000           $35,000               -                    -

Power and light        $22,500            $21,360                                $1,140

Insurance and           $15,500             $14,400                               $1,100

property taxes

Maintenance               $9,700            $9,456                                 $244

Total                        $623,500         $632,816          ($9,316)

b) Factory wages were higher than budgeted by $20,000 or 7.55%, supervisory salaries were lower than budget by $4,200 or 6.19%, power and light were lower than budgeted by $1,140 or 5.07%, and insurance and property taxes were lower than budgeted by $1,100 or 7.1%

Answer 2

a) The Budget Performance Report  for the month ending March 31 to be presented to the Supervisor of Department 6, Cardinal Company is as follows:

                                                             Budget       Actual          Variance

Materials                                            $208,000  $204,000     $4,000  F

Factory wages                                     265,000    285,000     20,000  U

Supervisory salaries                              67,800       63,600       4,200  F

Depreciation of plant and equipment 35,000       35,000               0  None

Power and light                                    22,500         21,360         1,140  F

Insurance and property taxes              15,500         14,400         1,100  F

Maintenance                                           9,700          9,456           244  F

b) Significant Variances:

Factory Wages = 7.55% ($20,000/$265,000 x 100) Unfavorable

Supervisory salaries = 6.2% ($4,200/$67,800 x 100) Favorable

Power and Light = 5.1% ($1,140/$22,500 x 100) Favorable

Insurance and property taxes = 7.1% ($1,100/$15,500 x 100) Favorable

Thus, the significant variances that should be investigated by the supervisor included Factory Wages, Supervisory Salaries, Power and Light, and Insurance and Property Taxes for March.

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