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

Question

You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” 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 March:

During March, the company worked 13,000 machine-hours and produced 7,000 units. The company had originally planned to work 15,000 machine-hours during March.

Complete the report showing the activity variances for March. (Indicate 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 positive values.)

Complete the report showing the spending variances for March. (Indicate 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 positive values.)

You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” 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 March:

FAB Corporation Activity Variances For the Month Ended March 31 Utilities Maintenance Supplies Indirect labor Depreciation Total

Explanation / Answer

1) FAB Corporation

Activity Variances

For the Month Ended March 31 (Amounts in $)

2)   FAB Corporation

Spending Variances

For the Month Ended March 31 (Amounts in $)

Particulars Planning Budget Flexible Budget Activity Variances Machine Hours (h) 15,000 13,000 Utilities ($16,700+$0.11h) 18,350 18,130 220 F Maintenance ($38,500+$1.70h) 64,000 60,600 3,400 F Supplies ($0.60h) 9,000 7,800 1,200 F Indirect Labor ($94,300+$1.70h) 119,800 116,400 3,400 F Depreciation ($68,100) 68,100 68,100 0 F Total 279,250 271,030 8,220 F

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