Question: Becky Hoefer, the plant manager of Travel Far's Indiana plant, is responsible for all of that plant's costs other than her own salary. The plant has two operating departments and one service department. The camper and trailer operating departments manufacture different products and have their own managers. The office department, which Hoefer also manages, provides services equally to the two operating departments. A budget is prepared for each operating department and the office department. The company's responsibility accounting system must assemble information to present budgeted and actual costs in performance reports for each operating department manager and the plant manager. Each performance report includes only those costs that a particular operating department manager can control: raw materials, wages, supplies used, and equipment depreciation. The plant manager is responsible for the department managers' salaries, utilities, building rent, office salaries other than her own, and other office costs plus all costs controlled by the two operating department managers. The annual departmental budgets and actual costs for the two operating departments follow.
The office department's annual budget and its actual costs follow
Budget Actual
Plant manager salary . . . . . . . . . $ 60,000 $ 62,000
Other office salaries . . . . . . . . . 30,000 27,700
Other office costs . . . . . . . . . . . 22,000 19,200
Totals . . . . . . . . . . . . . . . . . . . . . $112,000 $108,900
Required: 1. Prepare responsibility accounting performance reports like those in list costs controlled by the following:
a. Manager of the camper department.
b. Manager of the trailer department.
c. Manager of the Indiana plant. In each report, include the budgeted and actual costs and show the amount that each actual cost is over or under the budgeted amount.
Analysis Component
2. Did the plant manager or the operating department managers better manage costs? Explain.