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(Solved) (Latest ver. Aug 2020) - Overhead Performance Report

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Preparing an Overhead Performance Report

Several years ago, Edwards Inc. developed a comprehensive budgeting system for profit planning and control purposes. The line supervisors have been very happy with the system and with the reports being prepared on their performance, but both middle and upper management have expressed considerable dissatisfaction with the information being generated by the system. A typical manufacturing overhead performance report for a recent period follows:

Edwards Inc.
Overhead Performance Report - Machining Department
For the Quarter Ended June 30

ActualBudgetVariance
Machine-hours.....................................20,00024,000
Variable overhead costs:
Indirect materials...............................$15,200 $16,800 $1,600 F
Rework............................................4,2004,800600 F
Utilities............................................34,20036,0001,800 F
Machine setup..................................9,4009,600200 F
Total variable overhead cost....................63,00067,2004,200 F
Fixed overhead costs:
Maintenance.....................................64,30065,000700 F
Inspection........................................54,00054,0000
Total fixed overhead cost........................118,300119,000700 F
Total overhead cost...............................$181,300 $186,200 $4,900 F

After receiving a copy of this overhead performance report, the supervisor of the Machining Department stated, "These reports are super. It makes me feel really good to see how well things are going in my department. I can't understand why those people upstairs complain so much."

The budget data above are for the original planned level of activity for the quarter.

Required:
1.The company's vice president is uneasy about the performance reports being prepared and would like you to evaluate their usefulness to the company.
2.What changes, if any, should be made in the overhead performance report to give better insight into how well the supervisor is controlling costs?
3.Prepare a new overhead performance report for the quarter, incorporating any changes you suggested in (2) above. (Include both the variable and the fixed costs in your report.)

 







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