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 $17,000 plus $0.18 per machine-hourS 22,400 Maintenance $38,900 plus $1.30 per machine-hour 58,700 $ 11,800 Indirect labor $94,500 plus $1.30 per machine-hour $121,400 $ 69,700 Utilities Supplies Depreciation $68,000 $0.60 per machine-hour During March, the company worked 18,000 machine-hours and produced 12,000 units. The company had originally planned to work 20,000 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 FAB Corporation Flexible Budget For the Month Ended March 31 Utilities 20240 Maintenance 62300 Supplies 10800 Indirect labor 117900 Depreciation 68000 Total 279240 2 FAB Corporation Spending Variances For the Month Ended March 31 Actual Results Spending Variance Flexible Budget Utilities 22400 2160 U 20240 Maintenance 58700 3600 F 62300 Supplies 11800 1000 U 10800 Indirect labor 121400 3500 U 117900 Depreciation 69700 1700 U 68000 Total 284000 4760 U 279240

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