October 11, 2010
Professor Brett Hunkins
Waltham Motors Division is a wholly owned subsidiary of Marco Corporation. The company manufactures electric motors of a single design which are usually purchased by household appliance manufacturers. The company was later acquired in 2003 by Marco Corporation. Prior to the acquisition, it was a family business.
Problem: Sharon Michaels, who happened to be appointed as division controller for the company was concerned about the financial report of May, 2004, given to her by the plant accountant. The report indicated huge variance discrepancies between the budgeted profit ($91,200) and the actual outcome …show more content…
The performance report shows some major variations between the expected and actual costs, which are leading to the deficiencies that the company experienced in the month of May. The expected budget analysis made by the plant accountant is less than the actual costs the company incurred in some instances of the report, which has led to the huge loss that the company suffered. Taking into account the data given by the plant accountant in the case, I realize that his haste in preparing the results created some of these problems. Direct Labor for instance was unfavorable, taking into account the extra data he provided to compute the actual cost section; however, it shows on the report that it is favorable. Moreover, there are other unfavorable variances which he characterized as favorable due to his wrong calculations. Some of these include idle time, shipping cost and Cleanup time. It seems to me that he did not take the time to calculate per unit cost in order to get a bigger picture and also spot out all the right variances. Based on the tables I have above for the expected unit costs, I could tell that his actual unit costs were a mismatch when I used two different ways of determining that answer. When I first used the method where I calculated the actual per unit costs (variable costs + fixed costs /number of units produced), I arrived at $49.51; and this is based on the numbers