CHAPTER 14 - PROBLEM 3 (EVALUATION OF PERFORMANCE)
The following cost-volume formula for factory overhead are given for the Ranjie Tool Company for Year 20X3:
Item Cost-Volume Formula
Utilities P 1,600 per year ; plus P 0.80 per labor hour
Supplies P 2,200 per year ; plus P 1.80 per labor hour
Depreciation P 6,00 per year
Indirect Labor P 5,400 per year ; plus P 1.20 per labor hour
Insurance P 1,200 per year
During the year, the following actual activity took place:
Budgeted labor hours 4,000 hours
Actual labor hours worked 4,200 hours
Actual overhead costs:
Utilities (P1,600 fixed) ₱ 5,200.00
Supplies (P2,200 fixed) 9,600.00
Depreciation 6,000.00
Indirect Labor (P5,400 fixed) 10,700.00
Insurance 1,200.00
Ranjie Tool Company
Performance Report
For the Year 20X3
Cost-Volume Actual Budgeted Based Variance
Formula (4,200 Hours) (4,200 Hours) U (F)
Variable Overhead Costs:
Utilities ₱ 0.80 ₱ 3,600.00 ₱ 3,360.00 ₱ 240.00
Supplies 1.8 7,400.00 7,560.00 -160
Indirect Labor 1.2 5,300.00 5,040.00 260
Total ₱ 3.80 ₱ 16,300.00 ₱ 15,960.00 ₱ 340.00
Fixed Overhead Costs:
Utilities ₱ 1,600.00 ₱ 1,600.00
Supplies 2200 2200
Depreciation 6000 6000
Indirect Labor 5400 5400
Insurance 1200 1200
Total ₱ 16,400.00 ₱ 16,400.00
Total Factory Overhead Costs ₱ 32,700.00 ₱ 32,360.00 ₱ 340.00
Supporting Computations:
Actual (4,200 Hours): Variable Overhead Cost - Fixed Overhead Cost
Utilities (P5,200 - 1,600) ₱ 3,600.00
Supplies (P9,600 - 2,200) ₱ 7,400.00
Indirect Labor (P10,700 - 5,400) ₱ 5,300.00
Budgeted Based on 4,200 Hours : Actual Hours Worked x Actual Hours Rate per Hour
Utilities (4,200 x P0.80) ₱ 3,360.00
Supplies (4,200 x P1.80) ₱ 7,560.00
Indirect Labor (4,200 x P1.20) ₱ 5,040.00
Favorable
Unfavorable
Favorable
Favorable
Favorable
CHAPTER 14 - PROBLEM 4 (EVALUATION OF PERFORMANCE)
Rosal Corporation has three divisions - marketing, production, and personnel.
There is a manager in charge of each division. The flexible budget for each division follows:
Marketing Production Personnel
Controllable costs:
Direct Materials ₱ 20,000.00
Direct Labor 50,000.00
Salaries ₱ 80,000.00 ₱ 70,000.00
Supplies 20,000.00 6,000.00 4,000.00
Maintenance 2,000.00 4,000.00 2,000.00
Total ₱ 102,000.00 ₱ 80,000.00 ₱ 76,000.00
Actual costs by division were:
Controllable costs:
Direct Materials ₱ 24,000.00
Direct Labor 48,000.00
Salaries ₱ 102,000.00 ₱ 68,000.00
Supplies 1,600.00 4,000.00 3,000.00
Maintenance 400.00 3,000.00 1,000.00
Total ₱ 104,000.00 ₱ 79,000.00 ₱ 72,000.00
REQUIRED 1 : Prepare and evaluate a performance report for the production manager
Actual Cost Flexible Budget Cost Variance (U) OR (F)
Controllable costs:
Direct Material ₱ 24,000.00 ₱ 20,000.00 -₱ 4,000.00
Direct Labor 48,000.00 50,000.00 2,000.00
Supplies 4,000.00 6,000.00 2,000.00
Maintenance 3,000.00 4,000.00 1,000.00
Total ₱ 79,000.00 ₱ 80,000.00 ₱ 1,000.00
The cost of raw materials rises significantly because of deficient machinery due to the cutback in maintenance
expenditures, or to the lower of labor cast, possibly due to the use of less-skilled workers
Supplies decreased, as it indicates inadequacies for the next period's production run.
REQUIRED 2: Prepare and evaluate a performance report for the Vice President
Actual Cost Flexible Budget Cost Variance (U) or (F)
Controllable costs:
Marketing division ₱ 104,000.00 ₱ 102,000.00 ₱ -2,000.00
Production division 79,000.00 80,000.00 1,000.00
Personnel division 72,000.00 76,000.00 4,000.00
Other costs 68,800.00 70,000.00 (2,000.00)
Total ₱ 323,800.00 ₱ 328,000.00 ₱ 1,000.00
The marketing division is behind its cost allotment
The personnel division came under its budgeted costs.
Perhaps, there has been a cutback in hiring which indicates possible reduction in future production.
Unfavorable
Favorable
Favorable
Favorable
Favorable
n maintenance
Unfavorable
Favorable
Favorable
Unfavorable
Favorable
