You have just been hired by FAB Corporation, the manufacturer of a revolutionary
ID: 2545686 • 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 15,000 machine-hours and produced 9,000 units. The company had originally planned to work 17,000 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.)
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 Planning budget Activity variances Utilities 19400 19800 400 F Maintenance 68100 72100 4000 F Supplies 9000 10200 1200 F Indirect labor 118600 121800 3200 F Depreciation 67600 67600 0 None Total expenses 282700 291500 8800 F 2 Flexible budget Actual Activity variances Utilities 19400 21600 2200 U Maintenance 68100 65900 2200 F Supplies 9000 10000 1000 U Indirect labor 118600 122700 4100 U Depreciation 67600 69300 1700 U Total expenses 282700 289500 6800 U
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