The Budget for Department 5 of Plant M for the Current

question 95

Essay

The budget for Department 5 of Plant M for the current month ending March 31 is as follows: $\begin{array}{lr}\text { Materials } & \$ 206,000 \\\text { Factory wages } & 265,000 \\\text { Supervisory salaries } & 67,800 \\\text { Depreciation of plant and equipment } & 35,000\\\text { Power and light } & 22,500 \\\text { Insurance and property taxes } & 15,500 \\\text { Maintenance } & 9,700\end{array}$ ?
During March, the costs incurred in Department 5 of Plant M were materials, $204,000; factory wages, $285,000; supervisory salaries, $63,600; depreciation of plant and equipment, $35,000; power and light, $21,360; insurance and property taxes, $14,400; maintenance, $9,456.
(a)Prepare a budget performance report for the supervisor of Department 5 of Plant M for the month of March.
(b)Are there any significant variances (greater than 5%) of the budgeted amounts that should be examined by the supervisor?

---

Definitions:

Technologically Obsolete

A state where a product or equipment becomes outdated or no longer competitive due to advances in technology.

Discount Rate

This is the interest rate used in discounted cash flow analysis to determine the present value of future cash flows.

Salvage Value

The expected sale price of an asset at the end of its effective life.

Net Operating Cash Flows

The amount of cash generated by a company's normal business operations after paying operating expenses and taxes.