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 21,040 52,600 $ 12,600 $119,400 $69,500 Cost Formula Utilities Maintenance $38,000 plus $1.30 per machine-hour Supplies Indirect labor $94,500 plus $1.50 per machine-hour Depreciation $67,800 $17,000 plus S0.14 per machine-hour S0.80 per machine-hour During March, the company worked 14,000 machine-hours and produced 8,000 units. The company had originally planned to work 16,000 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

1 Flexible budget :

2 spending variance :

Utilities 18960 Maintenance 56200 Supplies 11200 Indirect labour 115500 Depreciation 67800 Total 269660

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