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 companys 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 Cost Formula March $20,600 plus $0.10 per machine-hour $40,000 plus $1.60 per machine-hour $0.30 per machine-hour $130,000 plus $0.70 per machine-hour $70,000 s 24,200 $ 78,100 $ 8,400 $ 149,600 $ 71,500 Supplies ndirect labor During March, the company worked 26,000 machine-hours and produced 15,000 units. The company had originally planned to work 30,000 machine-hours during March. Required: 1. Complete the each variance by selecting "F" for favorable, "U" for unfavorable, and "None for m report showing the activity variances for March. (Indicate the effect of

Explanation / Answer

Activity variance :

Spending variance :

Machine hours 26000 30000 Utilities 23200 400 F 23600 Maintenance 81600 6400 F 88000 Supplies 7800 1200 F 9000 Indirect labour 148200 2800 F 151000 Depreciation 70000 None 70000 Total 330800 10800 F 341600

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