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,e8e $ 78,000 $ 9,40e $133,40e $69,5ee Cost Formula Utilities Maintenance Supplies Indirect labor Depreciation $16,400 plus $e.12 per machine-hour $38,600 plus $1.90 per machine-hour $e.40 per machine-hour $94,1e0 plus $1.60 per machine-hour $67,800 During March, the company worked 22,000 machine-hours and produced 16,000 units. The company had originally planned to work 24,000 machine-hours during March Required: 1. Calculate the activity variances for March 2. Calculate the spending variances for March Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate 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 labor Depreciation Total Required 1 Required 2 >

Explanation / Answer

1 Flexible budget Planning budget Activity variances Utilities 19040 19280 240 F Maintenance 80400 84200 3800 F Supplies 8800 9600 800 F Indirect labor 129300 132500 3200 F Depreciation 67800 67800 0 None Total expenses 305340 313380 8040 F 2 Flexible budget Actual Activity variances Utilities 19040 21080 2040 U Maintenance 80400 78000 2400 F Supplies 8800 9400 600 U Indirect labor 129300 133400 4100 U Depreciation 67800 69500 1700 U Total expenses 305340 311380 6040 U

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