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 Cost Formula in March $16,600 plus $0.17 per machine-hour $ 22,310 Maintenance $38,000 plus $2.10 per machine-hour 80,100 $ 18,200 Indirect labor $94,200 plus $1.20 per machine-hour $122,700 $ 69,600 Utilities Supplies Depreciation $67,900 $0.80 per machine-hour During March, the company worked 21,000 machine-hours and produced 15,000 units. The company had originally planned to work 23,000 machine-hours during March. Required 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 labor Depreciation Total

Explanation / Answer

Planning budget Activity variances Flexible budget Utilities 20510 340 F 20170 Maintenance 86300 4200 F 82100 Supplies 18400 1600 F 16800 Indirect labor 121800 2400 F 119400 Depreciation 67900 0 None 67900 Total 314910 8540 F 306370 Actual Spending variances Flexible budget Utilities 22310 2140 U 20170 Maintenance 80100 2000 F 82100 Supplies 18200 1400 U 16800 Indirect labor 122700 3300 U 119400 Depreciation 69600 1700 U 67900 Total 312910 6540 U 306370

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