You have just been hired by OpenDoor Corporation, the manufacturer of a revoluti

Question

You have just been hired by OpenDoor 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 Actual Cost in April Cost Formula $17,800 plus $0.17 per machine- $39,700 plus $3.00 per machine- $0.40 per machine-hour 23,405 Utilities hour 97,500 Maintenancehour $8,200 Supplies Indirect $95,300 plus $1.65 per machine- 131,925 labor hour Depreciation $68,600 $71,300 During April, the company worked 19,500 machine-hours and produced 14,500 units The company had originally planned to work 21,500 machine-hours during April

Explanation / Answer

1) Flexible budget :

2) Spending variance

Flexible budget Utilities (19500*.17+17800) 21115 Maintenance (19500*3+39700) 98200 Indirect labour (19500*1.65+95300) 127475 Supplies (19500*.40) 7800 Depreciation 68600 Total expense 323190

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