You have just been hired by FAB Corporation, the manufacturer of a revolutionary

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: Actual Cost in March 21,500 $ 61,900 $ 17,800 $ 119,800 $69,500 Cost Formula Utilities Maintenance Supplies Indirect labor Depreciation $16,300 plus $0.17 per machine-hour $38,100 plus $1.50 per machine-hour $0.90 per machine-hour $94,900 plus $1.20 per machine-hour $67,800 During March, the company worked 18,000 machine-hours and produced 12,000 units. The company had originally planned to work 20,000 machine-hours during March. Required 1. 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.) FAB Corporation Flexible Budget For the Month Ended March 31 Utilities Maintenance Supplies Indirect labor Depreciation Total

Explanation / Answer

Prepare flexible budget :

Utilities (18000*.17+16300) 19360 Maintenance (18000*1.5+38100) 65100 Supplies (18000*.90) 16200 Indirect labour (18000*1.2+94900) 116500 Depreciation 67800 Total 284960

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