Problem:
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.
|
|
Budget
|
Actual
|
|
|
Campers
|
Trailers
|
Combined
|
Campers
|
Trailers
|
Combined
|
|
Raw materials
|
$160,000
|
$250,000
|
$ 410,000
|
$159,400
|
$246,500
|
$ 405,900
|
|
Employee wages
|
99,000
|
191,000
|
290,000
|
102,300
|
193,700
|
296,000
|
|
Dept manager salary
|
40,000
|
44,000
|
84,000
|
41,000
|
47,000
|
88,000
|
|
Supplies used
|
34,000
|
83,000
|
117,000
|
31,900
|
84,600
|
116,500
|
|
Depreciation-Equip
|
58,000
|
110,000
|
168,000
|
58,000
|
110,000
|
168,000
|
|
Utilities
|
2,800
|
4,200
|
7,000
|
2,700
|
3,800
|
6,500
|
|
Building rent
|
5,000
|
8,000
|
13,000
|
4,800
|
7,200
|
12,000
|
|
Office department costs
|
56,000
|
56,000
|
112,000
|
54,450
|
54,450
|
108,900
|
|
Totals
|
$454,800
|
$746,200
|
$1,201,000
|
$454,550
|
$747,250
|
$1,201,800
|
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 Exhibit 21.28 that 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.
2. Did the plant manager or the operating department managers better manage costs? Explain.