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:

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.

Complete the report showing the activity variances 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.)

Complete the report showing the spending variances 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.)

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:

Explanation / Answer

Solution:-

1. Complete the report showing the activity variances for March:-

2. Complete the report showing the spending variances for March:-

Please Rate or comment if you have any doubt regarding this solution.

FAB Corporation Activity Variances For the Month Ended March 31 Planning budget Flexible budget Activity variance Machine hours (q) 25,000 23,000 Utilities Utilities ($16,300 + ($0.20*q)) 21,300 20,900 400 F Maintenance ($38,800 + ($1.60*q)) 78,800 75,600 3,200 F Supplies ($0.50*q) 12,500 11,500 1,000 F Indirect labor ($94,900 + ($1.60*q)) 134,900 131,700 3,200 F Depreciation ($68,400) 64,400 68,400 0 None Total 311,900 308,100 3,800 F

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