You have just been hired by FAB Corporation, the manufacturer of a revolutionary
ID: 2463475 • Letter: Y
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 19,000 machine-hours and produced 13,000 units. The company had originally planned to work 21,000 machine-hours during March.
Prepare a flexible budget 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.)
Prepare a 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:
Explanation / Answer
1. Flexible Budget for March:
2. Spending variances:
Cost Flexible Budget Volume variance Planning budget 19,000 machine hours 21,000 machine hours Utilities $ 18,950 $ 300 F $ 19,250 Maintenance $ 59,200 $ 2,200 F $ 61,400 Supplies $ 5,700 $ 600 F $ 6,300 Indirect labor $ 119,000 $ 2,600 F $ 121,600 Depreciation $ 67,600 None $ 67,600Related Questions
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