Problem 9-20 Activity and Spending Variances [LO9-1, LO9-2, LO9-3] You have just

Question

Problem 9-20 Activity and Spending Variances [LO9-1, LO9-2, LO9-3] 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 $ 22,300 $ 72,900 s 14,200 $136,400 $ 70,000 Cost Formula Utilities Maintenance Supplies Indirect labor $94,700 plus $1.70 per machine-hour Depreciation $16,900 plus $0.15 per machine-hour $38,300 plus $1.70 per machine-hour $0.60 per machine-hour $68,300 During March, the company worked 22,000 machine-hours and produced 16,000 units. The company had originally planned to work 24,000 machine-hours during March Required 1. Calculate the activity variances for March 2. Calculate the spending variances for March

Explanation / Answer

planned buget = 24000 machine hours * variable cost per unit +Fixed cost Flexible budget = 22000 actual machine hours *Variable cost per unit +Fixed c0st Activity variance flexible planned Activity variance budget budget Utilities 20200 20500 300 U Maintenance 75700 79100 3400 U Supplies 13200 14400 1200 U indirect labor 132100 135500 3400 U Depreciation 68,300 70,000 1,700 U TOTAL 309500 319500 10000 U Spending variance Actual Flexible spending variance results budget Utilities 22,300 20,200 2,100 U Maintenance 72,900 75,700 2,800 F Supplies 14,200 13,200 1,000 U indirect labor 136,400 132,100 4,300 U Depreciation 70,000 68,300 1,700 U TOTAL 315,800 309,500 6,300 U

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