Several years ago, Westmont Corporation developed a comprehensive budgeting system for planning and control purposes. While departmental supervisors have been happy with the system, the factory manager has expressed considerable dissatisfaction with the information being generated by the system.

A report for the company's Assembly Department for the month of March follows:

Assembly Department Cost Report For the Month Ended March 31
	Actual Results	Planning Budget	Variances
Machine-hours	25,000	30,000
Variable costs:
Supplies	$ 8,400	$ 9,000	$ 600	F
Scrap	28,000	30,000	2,000	F
Indirect materials	83,000	97,500	14,500	F
Fixed costs:
Wages and salaries	73,900	70,000	3,900	U
Equipment depreciation	100,000	100,000	0
Total cost	$ 293,300	$ 306,500	$ 13,200	F

After receiving a copy of this cost report, the supervisor of the Assembly Department stated, These reports are super. It makes me feel really good to see how well things are going in my department. I cant understand why those people upstairs complain so much about the reports.

For the last several years, the companys marketing department has chronically failed to meet the sales goals expressed in the companys monthly budgets.

Required:

1. The companys president is uneasy about the cost reports, identify at least two reasons.

2. What kind of reports should be used to give better insight into how well departmental supervisors are controlling costs?

3. Complete the new performance report for the quarter, based on Flexible Budget Performance approach.

4. Were costs well controlled in March?

The companys president is uneasy about the cost reports, identify at least two reasons. (Select "X" if the item is one of the reasons.)

Cost reports are ineffective since budgeted costs at one level of activity are compared to actual costs at another level of activity. Cost reports show whether fixed costs are controlled and do not show whether variable costs are controlled. Cost reports are effective since budgeted costs at one level of activity are compared to actual costs at another level of activity. Cost reports show whether fixed costs and variable costs are controlled.