Joanne Graves Is Manager of a Production Department of Fordham

question 46

Essay

Joanne Graves is manager of a production department of Fordham Company. Her department makes one product; the following information for her department was accumulated for the current year:
Required:
1) Prepare a flexible budget for the department's actual level of activity.2) Use the flexible budget to evaluate the performance of Ms. Graves' department.3) Why does the budget not include sales revenue and net income?
$\begin{array}{|l|r|r|}\hline &{\text { Static Budget }} & {\text { Actual Results }} \\\hline \text { Number of units } & 100,000 & 94,000 \\\hline\text { Direct materials cost }&\$400,000&\$380,000\\\hline \text { Direct labor cost } & 200,000 & 185,000 \\\hline \text { Variable manufacturing overhead } & 100,000 & 94,000 \\\hline \text { Fixed manufacturing overhead } & 145,000 & 148,000 \\\hline \text { Total } & \$ 845,000 & \$ 807,000 \\\hline\end{array}$

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Definitions:

Social Exchange Theory

A hypothesis positing that actions within a society stem from a transactional process designed to optimize advantages while reducing disadvantages.

Bystander Effect

A social psychological phenomenon where individuals are less likely to offer help to a person in need when other people are present.

Commotion

Disturbance or turmoil caused by a large amount of noise and confusion.

Social Exchange Theory

A sociological and psychological theory that studies the social behavior in the interaction of two parties that implement a cost-benefit analysis to determine risks and benefits.