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Calrissian Motors Division Calrissiar Motors Division manufactured electric motors of single design that were sold to household appliance manufacturers. BobaFett, division controller of Calrissian Motors, a wholly-owned subsidiary of Cloud City Enterprises, had requested a performance report from the plant accountant. Calrissian Motors had recently lost major customer contract, and BobaFett was anxious to see how the division had compensated for the loss. The division had prepared budget for 2014 based on estimated sales and production costs. The monthly budget was simply ne-twelfth of the annual budget because sales were not subject to seasonal fluctuations. No adjustments had been made to the May budget when Calrissian lost the contract April. A glance at the performance report confirmed Fett's fears; the division had generated much smaller than expected operating income in May. Even allowing for lost volume, Fett had expected better outcome than he sawin the per formance report. The plant accountant who prepared the performance report, included the following memo: Boba: As promised, here is the performance report for May. Though the bottom line is disappointing, plant performance looks great, and crews there deserve our compliments. Note that they are at or under budget on costs other than supervision and idle time. suspect the unfavorable variance in supervision was caused by the work involved in controlling other costs, and some idle time to be expected given the lost contract Here's the additional information you requested: 1. We had no beginning or ending inventories in work-in-process or finished goods this month 2. The standard direct material cost was $6per motor 3. We are still using twohours per unit as standard labor time 4. Actual material prices were 7% less than expected thanks to reduction in the taxes imposed by the Galactic Empire. 5. Actual direct labor costs were $8 20per hour due to an increaseir the minimum wage Calrissian Motors Performance Report May 2014 Budget Actual Variance Units 22,000 18,000 4,000 U Sales 1,056,000 882,000 174,000 U Variable manufacturing costs Direct material 132,000 109,800 22,200 F Direct labor 352,000 311,600 40,400 F Indire labor 70,400 57,060 13,340 F Idle time 17,600 18,180 580 U Cleanup time 13,200 12,780 420 F Miscellaneous supplies 6,380 5,220 1,160 F Totalvariable manufacturing costs 591,580 514,640 76,940 F Variable shipping costs 35,200 34,200 1,000 F Totalvariable costs 626,780 548,840 77,940 F Contribution margin 429,220 333,160 96,060 U Nonvariable manufacturing costs Supervision 57,600 58,800 1,200 U Rent 20,000 20,000 o Depreciation 60,000 60,000 Other 10,400 10,400 o Totalnonvariable manufacturing costs 148,000 149,200 1,200 U Selling and administrative costs 112,000 112,000 Totalnonvariable selling, andadministrative costs 260,000 261,200 1,200 U Operating income (loss) 169,220 71,960 97,260 U Required: 1. Create flexible budget for the Calrissian Motors Division. What additional insight does this analysis provide about Calrissian's performance in May? 2. Calculate the static-budget, activity-level, and flexible-budget variances for operating income. Whatdoes each of these variances tell BobaFett? 3. Calculate the direct labor price and quantity variances What is the interpretation of each variance? Should BobaFett incorporate the information from these variances in planning for future periods fnot, why not?If so, what might BobaFet consider? 4. Calculate the direct materials price and quantity variances. What the interpretation of each variance? Should BobaFett incorporate the information from these variances in planning for future periods? If not, why not?It so, what might BobaFett consider?

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Calrissian Motors Division Budget Assignment
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