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: Cost Formula Actual Cost in March Utilities $16,100 plus $0.19 per machine-hour $ 21,700 Maintenance $38,900 plus $1.20 per machine-hour $ 56,700 Supplies $0.40 per machine-hour $ 7,800 Indirect labor $94,700 plus $1.60 per machine-hour $ 127,600 Depreciation $67,500 $ 69,200 During March, the company worked 18,000 machine-hours and produced 12,000 units. The company had originally planned to work 20,000 machine-hours during March. Required: 1. 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.) 2. 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.)

Explanation / Answer

Answer:1

FAB CORPORATION Activity variance For the month ended March 31 Particulars Flexible budget Planning Budget Activity variances Machine-hours (q) 18000 20000 Utilities ($16,100 + $0.19q) 19520 19900 380 F Maintenance ($38900 + $1.20q) 60500 62900 2400 F Supplies ($0.40q) 7200 8000 800 F Indirect labor ($94,700 + $1.60q) 123500 126700 3200 F Depreciation ($67,500) 67500 67500 Total 278220 285000 6780 F FAB CORPORATION Spending variance For the month ended March 31 Particulars Actual Results Flexible budget Spending variance Machine-hours (q) 18000 18000 Utilities ($16,100 + $0.19q) 21700 19520 2180 U Maintenance ($38900 + $1.20q) 56700 60500 3800 F Supplies ($0.40q) 7800 7200 600 U Indirect labor ($94,700 + $1.60q) 127600 123500 4100 U Depreciation ($67,500) 69200 67500 1700 U Total 283000 278220 4780 U

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.