Prepare a more informative production performance report for June to assist in t
ID: 2543144 • Letter: P
Question
Prepare a more informative production performance report for June to assist in the evaluation of Ken’s division
Background Information Spitzer Specialty Furniture manufactures furniture for specialty shops throughout the Southwest. With annual sales of $12 million, the company has four major product lines-bookcases, magazine racks, end tables, and bar stools-each of which is managed by a different production manager. Since production is spread fairly evenly over the year, controller Sara Massey has prepared an annual budget that is divided into 12 monthly reporting periods. Spitzer uses a standard cost system and applies variable overhead on the basis of machine hours. Fixed manufacturing overhead is allocated to the product lines based on the square footage they occupy using a predetermined plantwide rate. The size of the occupied space varies considerably across product lines. At the monthly meeting to review June's results, Ken Ashley, manager of the bookcase line, received the following performance report:Explanation / Answer
Spitzer Specialty Furniture Bookcase Production Performance Report For the Month Ended June 30 Planning Budget Volume Variance Flexible Budget Spending Variance Actual Units 2500 3000 3000 Sales revenue 137500 27500 F 165000 4000 U 161000 Variable production expenses: Direct material 20000 4000 U 24000 900 F 23100 Direct labor 15000 3000 U 18000 300 U 18300 Overhead 51250 10250 U 61500 1300 F 60200 Total variable production expenses 86250 17250 U 103500 1900 F 101600 Contribution margin 51250 10250 F 61500 2100 U 59400 Fixed production expenses: Indirect labor 6000 0 None 6000 3400 U 9400 Depreciation 5500 0 None 5500 0 None 5500 Taxes 2300 0 None 2300 100 U 2400 Insurance 4500 0 None 4500 0 None 4500 Administrative expense 9000 0 None 9000 3000 U 12000 Marketing expense 7000 0 None 7000 1300 U 8300 Research & development 4500 0 None 4500 1500 U 6000 Total fixed costs 38800 0 None 38800 9300 U 48100 Operating profit 12450 10250 F 22700 11400 U 11300