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: Utilities Actual Cost in Cost Formula March $16,500 + $0.14 per machine- $ 20,680 hour $38,700 + $1.80 per machine- 63,100 hour $0.40 per machine-hour 6,600 $94,600 + $1.40 per machine- 119,300 hour $67,500 69,200 A Maintenance Supplies Indirect labor Depreciation A A A During March, the company worked 15,000 machine-hours and produced 9,000 units. The company had originally planned to work 17,000 machine-hours during March. Required: 1. Calculate the activity variances for March. 2. Calculate the spending variances for March.

Answer 1

If it is helpful, please rate the answer and if any doubt arises let me know

FAB Corporation
Activity Variance
For the month ended March 31
		Planning Budget	Flexible Budget	Activity Variance
Machine hours	(q)	17,000	15,000
Utilities	[$16,500 + ($0.14 X q)]	$     18,880	$       18,600	$          280	F
Maintenance	[$38,700 + ($1.80 X q)]	$     69,300	$       65,700	$      3,600	F
Supplies	($0.40 X q)	$       6,800	$         6,000	$          800	F
Indirect Labor	[$94,600 + ($1.40 X q)]	$ 1,18,400	$   1,15,600	$      2,800	F
Depreciation	$                             67,500	$     67,500	$       67,500	$             -	None
Total		$ 2,80,880	$   2,73,400	$      7,480	F
FAB Corporation
Activity Variance
For the month ended March 31
		Flexible Budget	Actual results	Spending Variances
Machine hours	(q)	15,000	15,000
Utilities	[$16,500 + ($0.14 X q)]	$     18,600	$       20,680	$      2,080	U
Maintenance	[$38,700 + ($1.80 X q)]	$     65,700	$       63,100	$      2,600	F
Supplies	($0.40 X q)	$       6,000	$         6,600	$          600	U
Indirect Labor	[$94,600 + ($1.40 X q)]	$ 1,15,600	$   1,19,300	$      3,700	U
Depreciation	$                             67,500	$     67,500	$       69,200	$      1,700	U
Total		$ 2,73,400	$   2,78,880	$      5,480	U