You have just been hired by FAB Corporation, the manufacturer of a revolutionary
ID: 2516846 • 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 26,000 machine-hours and produced 15,000 units. The company had originally planned to work 30,000 machine-hours during March.
Cost Formula Actual Cost in March Utilities $20,600 plus $0.10 per machine-hour $ 24,200 Maintenance $40,000 plus $1.60 per machine-hour $ 78,100 Supplies $0.30 per machine-hour $ 8,400 Indirect labor $130,000 plus $0.70 per machine-hour $ 149,600 Depreciation $70,000 $ 71,500Required 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.) FAB Corporation Activity Variances For the Month Ended March 31 Utilities Maintenance Supplies Indirect laa Depreciation Total
Explanation / Answer
ACTIVITY VARIANCES
ACTUAL BUDGETED FAVOURABLE/(UNFAVOURABLE)
Utilities
SPENDING VARIANCES
ACTUAL BUDGETED FAVOURABLE/(UNFAVOURABLE)
Utilities
Utilities
24,200 23,600 (600) U Maintenance 78,100 88,000 9,900 F Supplies 8,400 9,000 600 F Indirect Labour 149,600 151,000 1,400 F Depreciation 71,500 70,000 (1,500) U Total 331,800 341,600 9,800 FRelated Questions
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