Problem 9-20 Activity and Spending Variances [LO9-1, LO9-2, LO9-3] You have just

Question

Problem 9-20 Activity and Spending Variances [LO9-1, LO9-2, LO9-3] You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president 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 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 t the company has never used a flexible budget, and you suggest that preparing such a budget would be cost data for March: Actual Cost in March Cost Formula $16, 100 plus $0.17 per machine-hour Utilities 21,300 Maintenance machine $38,600 plus $2.00 per s -hour Supplies Indirect labor Depreciation $67,600 $0.60 per machine-hour $94,100 plus $1.60 per machine-hour 11,800 69,300 Durina March the companv worked 18.000 machine-hours and oroduced 12.000 units. The comoanv had oriainallv planned to work 6:31 PM 11/6/2017

Explanation / Answer

1) Activity variance = Flexible budget - planned budget Flexible planned Activity varianace budget budget Utilities 19160 19500 340 F Maintenance 74600 78600 4000 F Supplies 10800 12000 1200 F indirect labor 122900 126100 3200 F Depreciation 67,600 67,600 0 N total 295060 303800 8740 2) Spending variance = Actual - flexible Flexible Actual Spending variance budget budget Utilities 19160 21,300 2140 U Maintenance 74600 72,400 2200 F Supplies 10800 11,800 1000 U indirect labor 122900 127,000 4100 U Depreciation 67,600 69,300 1700 U total 295060 301800 6740 U

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