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 23,100 $ 80,100 $17,300 $145,300 $70,000 Cost Formula Utilities Maintenance Supplies Indirect labor $94,400 plus $2.00 per machine-hour Depreciation 68,300 $16,300 plus $0.20 per machine-hour $38,800 plus $1.90 per machine-hour $0.70 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. Calculate the activity variances for March. 2. Calculate the spending variances for March. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate 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 Corporation Activity Variances For the Month Ended March 31 Utilities Maintenance Supplies Indirect lahor

Explanation / Answer

Planning budget Activity variances Flexible budget Utilities 21300 400 F 20900 Maintenance 86300 3800 F 82500 Supplies 17500 1400 F 16100 Indirect labor 144400 4000 F 140400 Depreciation 68300 0 None 68300 Total expense 337800 9600 F 328200 Actual Spending variances Flexible budget Utilities 23100 2200 U 20900 Maintenance 80100 2400 F 82500 Supplies 17300 1200 U 16100 Indirect labor 145300 4900 U 140400 Depreciation 70000 1700 U 68300 Total expense 335800 7600 U 328200

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