You have just been hired by FAB Corporation, the manufacturer of a revolutionery

Question

You have just been hired by FAB Corporation, the manufacturer of a revolutionery new garage door opening device. The president has asked that you roviaw the company's costing system and do what you can to help us get better control of our manufacturing overhead costs. You ind that the company has never used a lexible budget, and you sugges that preparing such a budget would be an excellent first step in overhead planring and contral After much effort and analysis, you determined the following cost fonmulas and gathered the following actual cost data for March: Actual Cost Cost Formua in March $16,000 plus $0.21 per machine-hour 22,630 Maintenance $38,500 plus S1.80 per machine-hour 73,700 5 18,200 Indirect labor $84,000 plus $1.30 per machine-hour 124,800 Supplies 50.80 per machine-our Dapraciation $68,00D During March, the company worked 21,000 machine-hours and produced 15,000 units. The compeny had aniginaly plannad to work 23,000 machine-hours during March Required: 1. Prepere a flexible budget for March. Ondicate the effect of each variance by selecting "F" for favorable, "U for unfavorable, and "None" for no effect (i.e, zero variance). Input all amounts as posltive values.) FAB Flexi ble Budget For the Month Ended March 31 UMlities Supplies Indirect labor Total

Explanation / Answer

Answer 1.

FAB Corporation

Activity Variances

For the Month Ended Mar 31

Planning Budget Flexible Budget Activity Variance

Machine Hours - (q) 23,000.00 21,000.00

Utilities - $16,000 + 0.21 q 20,830.00 20,410.00 420.00 (F)

Maintenace - $38,500 + $1.80 q 79,900.00 76,300.00 3,600.00 (F)

Supplies - $0.80 q 18,400.00 16,800.00 1,600.00 (F)

Indirect Labor - $94,000 + $1.30 q 123,900.00 121,300.00 2,600.00 (F)

Depreciation 68,000.00 68,000.00 - (F)

Total 311,030.00 302,810.00 8,220.00 (F)

Answer 2.

FAB Corporation

Spending Variances

For the Month Ended Mar 31

Flexible Budget Actual Spending Variance

Machine Hours - (q) 21,000.00 21,000.00

Utilities - $16,000 + 0.21 q 20,410.00 22,630.00 2,220.00 (U)

Maintenace - $38,500 + $1.80 q 76,300.00 73,700.00 2,600.00 (F)

Supplies - $0.80 q 16,800.00 18,200.00 1,400.00 (U)

Indirect Labor - $94,000 + $1.30 q 121,300.00 124,800.00 3,500.00 (U)

Depreciation 68,000.00 69,700.00 1,700.00 (U)

Total 302,810.00 309,030.00 6,220.00 (U)

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