You have just been hired by SecuriDoor Corporation, the manufacturer of a revolu

Question

You have just been hired by SecuriDoor Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company%u2019s costing system and %u201Cdo what you can to help us get better control of our manufacturing overhead costs.%u201D You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control.

       After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for April:

  

Cost Formula

Actual Cost in April

  Utilities

  $ 16,600 plus $.15 per machine-hour

$

21,100    

  Maintenance

  $ 38,900 plus $2.00 per machine-hour

$

68,700    

  Supplies

  $ .80 per machine-hour

$

14,200    

  Indirect labor

  $ 94,200 plus $1.80 per machine-hour

$

127,500    

  Depreciation

  $ 67,700

$

69,400    

  

During April, the company worked 16,000 machine-hours and produced 10,000 units. The company had originally planned to work 18,000 machine-hours during April.

  

Required:

1.

Prepare a flexible budget for April. (Input all amounts as positive values.)

  

SecuriDoor Corporation
Flexible Budget
For the Month Ended April 30

  Machine-hours

  Utilities

$

  Maintenance

  Supplies

  Indirect labor

  Depreciation

  Total

$

  

2.

Prepare a report showing the spending variances for April. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

  

SecuriDoor Corporation
Spending Variances
For the Month Ended April 30

Flexible
Budget

Actual
Results

Spending variance

  Utilities

$

$

$

  Maintenance

  Supplies

  Indirect labor

  Depreciation

  Total

$

$

$

You have just been hired by SecuriDoor Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company%u2019s costing system and %u201Cdo what you can to help us get better control of our manufacturing overhead costs.%u201D You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control.

       After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for April:

Explanation / Answer

1. The activity variances are shown below:    SecuriDoor Corporation
Activity Variances
For the Month Ended April 30
Planning Budget Flexible Budget Activity
Variances   Machine-hours (q)
18,000  
16,000  
  
    


  Utilities ($16,700 + $.14q) $ 19,220   $ 18,940   $ 280   F   Maintenance ($38,300 + $1.50q)
65,300  
62,300  
3,000   F   Supplies ($.40q)
7,200  
6,400  
800   F   Indirect labor ($94,700 + $1.80q)
127,100  
123,500  
3,600   F   Depreciation ($68,400)
68,400  
68,400  
0   None     
  Total $ 287,220   $ 279,540   $ 7,680   F

   2. The spending variances are computed below:    SecuriDoor Corporation
Spending Variances
For the Month Ended April 30
Flexible Budget Actual Results Spending Variances   Machine-hours (q)
16,000  
16,000  
  
    


  Utilities ($16,700 + $.14q) $ 18,940   $ 21,020   $ 2,080   U   Maintenance ($38,300 + $1.50q)
62,300  
59,100  
3,200   F   Supplies ($.40q)
6,400  
7,000  
600   U   Indirect labor ($94,700 + $1.80q)
123,500  
128,000  
4,500   U   Depreciation ($68,400)
68,400  
70,100  
1,700   U    
  Total $ 279,540   $ 285,220   $ 1. The activity variances are shown below:

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