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'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 April: During April, the company worked 19.000 machine-hours and produced 13.000 units. The company had originally planned to work 21.000 machine-hours during April. Complete the report showing the activity variances for April. Complete the report showing the spending variances for April.

Explanation / Answer

Items of Expenses Cost Formula Planned budget for 21000 hours Flexible Budget for 19000 hours at standard rate Actual result for 19000 hours Spending Variance (Flexible Budget - Actual) Favourable/Unfaourable Activity Varaiance(Planned budget - flexible budget) Favourable/Unfaourable $ $ $ $ $ Utilities $17000+ $0.13/machine hour 19730 19470 21530 -2060 U 260 F Maintenance $39000 + $1.50 /machine hour 70500 67500 64300 3200 F 3000 F Supplies $0.30 per machine hour 6300 5700 6100 -400 U 600 F Indirect Labour $94400+$1.50 / machine hour 125900 122900 126800 -3900 U 3000 F Depreciation $67900 67900 67900 69600 -1700 U 0 F Total -4860 U 6860 F

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