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 in March S 22,500 S 78,600 S 8,600 S 134,800 S 70,000 Cost Formula $16,300 plus $0.20 per machine-hour 38,600 plus $2.10 per machine-hour $0.40 per machine-hour 594,300 plus $1.80 per machine-hour S68,300 Utilities Supplics Indirect labor During March, the company worked 20,000 machine-hours and produced 14,000 units. The company had originally planned to work 22,000 machine-hours during March. Required: 1. 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.) FAB Activity Variances For the Month Ended March 31 Utilities Supplies Indirect labor Total

Explanation / Answer

Planning budget Activity variances Flexible budget Utilities 20700 400 F 20300 Maintenance 84800 4200 F 80600 Supplies 8800 800 F 8000 Indirect labor 133900 3600 F 130300 Depreciation 68300 0 None 68300 Total 316500 9000 F 307500 Actual Spending variances Flexible budget Utilities 22500 2200 U 20300 Maintenance 78600 2000 F 80600 Supplies 8600 600 U 8000 Indirect labor 134800 4500 U 130300 Depreciation 70000 1700 U 68300 Total 314500 7000 U 307500

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