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 Maintenance Supplies Indirect labor Depreciation Cost Formula $16,900 plus $0.11 per machine-hour $39,000 plus $1.20 per machine-hour $0.60 per machine-hour $94,500 plus $1.50 per machine-hour $67,600 Actual Cost in March $ 20,570 $ 53,200 $ 10,000 $ 120,900 $ 69,300 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. Complete this question by entering your answers in the tabs below.

Answer 1

Solutions:

12 Activity Variances - Fab Corporation For the month ended March 31 Flexible Budget Planning Budget Variances 15000 17000 15 Fav. / Unfav. Particulars Machine hours 18 Utilities Maintenance Supplies Indirect labor Depreciation $18,550 $57,000 $9,000 $117,000 $67,600 $18,770 $59,400 $10,200 $120,000 $67,600 $220 F $2,400 F $1,200 F $3,000 F $0 None 22 23 24 Total $269,150 $275,970 $6,820 F Fab Corporation - Spending Variances For the month ended March 31 Actual Results Flexible Budget | Variances | Fav. / Unfav. 15000 15000 Particulars Machine hours Utilities Maintenance Supplies Indirect labor Depreciation $20,570 $53,200 $10,000 $120,900 $69,300 $18,5501 $57,000 $9,000 $117,000 $67,600 $2,0200 $3,800 F $1,000 u $3,900 u $1,700 u 34 35 Total $273,970 $269,150 $4,820 u B) Sheet743 (2) Sheet26 (19) Sheet843 Sheet844 Sheet