Problem 9-19 Activity and Spending Variances [LO9-1, LO9-2, LO9-3] You have just

Question

Problem 9-19 Activity and Spending Variances [LO9-1, LO9-2, LO9-3]

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 23,000 machine-hours and produced 17,000 units. The company had originally planned to work 25,000 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.)

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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

Fab Corporation Activity Variance For the Month Ended March 31 Planning Budget Flexiable Budget Activity Variance Machine Hour 25000 23000 Utilities (16200 +0.18 Per Machine Hour) 20700 20340 360 Maintainance (38700 +1.50 Per Machine Hour) 76200 73200 3000 Supplies (.40 Per Machine Hour) 10000 9200 800 Indirect Labour (94800 + 2 Per Machine Hour) 144800 140800 4000 Depreciation (68500) 68500 68500 0 Total 320200 312040 8160 Fab Corporation Spending Variance For the Month Ended March 31 Flexiable Budget Actual Result Spending Variance Machine Hour 23000 23000 Utilities (16200 +0.18 Per Machine Hour) 20340 22500 -2160 Maintainance (38700 +1.50 Per Machine Hour) 73200 70000 3200 Supplies (.40 Per Machine Hour) 9200 9800 -600 Indirect Labour (94800 + 2 Per Machine Hour) 140800 145700 -4900 Depreciation (68500) 68500 70200 -1700 Total 312040 318200 -6160

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