Accounting for Decision Making and Control 7th Edition by Jerold Zimmerman

Exercise 11

Madigan Modems
Madigan produces a single high-speed modem. The following table summarizes the current month's budget for Madigan's modem production: Actual production and sales for the month were 3,900 units. Total production costs were $1,114,800, of which $631,800 were variable costs.
Required:
a. Prepare an end-of-month variance report for the production department using the beginning-of-month static budget.
b. Prepare an end-of-month variance report for the production department using the beginning-of-month flexible budget.
c. Write a short memo evaluating the performance of the production manager based on the variance report in (a).
d. Write a short memo evaluating the performance of the production manager based on the variance report in (b).
e. Which variance report-the one in (a) or (b)-best reflects the performance of the production manager? Why?