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 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 the company's costing system and “do what you can to After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March: Actual Cost Cost Formula Utilities Supplies Depreciation $68,000 in March $16,200 plus $0.17 per machine-hour $ 22,250 Maintenance $38,300 plus $1.60 per machine-hour 72,100 $ 7,300 Indirect labor $94,900 plus $1.20 per machine-hour 125,800 $ 69,700 0.30 per machine-hour During March, the company worked 23,000 machine-hours and produced 17,000 units. The company had originally planned to work 25,000 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 for March is prepared as shown below:

2. Report showing spending variance is as shown below:

Spending variance is difference between actual and flexible budget.

FAB Corporation Flexible Budget For the Month Ended march 31 Particulars Flexible Budget Utilities 16,200+ *.17*23,000 20,110 Maintenance 38,300+1.6*23,000 75,100 Supplies 0.3*23,000 6,900 Indirect labour 94,900+1.2*23,000 122,500 Depreciation 68,000 68,000 Total 292,610

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