You have just been hired by FAB Corporation, the manufacturer of a revolutionary
ID: 2554351 • 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 22,000 machine-hours and produced 16,000 units. The company had originally planned to work 24,000 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 Planning budget Flexible budget Activity variances Utilities 18980 18740 240 F Maintenance 81900 78300 3600 F Supplies 7200 6600 600 F Indirect labor 125500 122900 2600 F Depreciation 68400 68400 0 None Total expenses 301980 294940 7040 F 2 Actual Flexible budget Spending variances Utilities 20780 18740 2040 U Maintenance 75700 78300 2600 F Supplies 7000 6600 400 U Indirect labor 126400 122900 3500 U Depreciation 70100 68400 1700 U Total expenses 299980 294940 5040 U
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