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 Cost Formula $ 23,350 $ 62,400 $14,800 $135,700 $70,100 $16,300 plus $0.21 per machine-hour Utilities Maintenance $38,600 plus $1.20 per machine-hour Supplies Indirect labor $94,800 plus $1.60 per machine-hour Depreciation $0.60 per machine-hour $68,400 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.

Answer 1

					Flexible
					budget
		machine hours			23,000
		fixed	variable
utilities		16,300	0.21		21130
maintenance		38,600	1.2		66200
supplies			0.6		13800
indirect labor		94,800	1.6		131600
Depreciation		68,400			68,400
tota			3.61		301130
			cost formula = machine hours * variable cost per mh + fixed cost
			Spending variance = actual budget - flexible budget
					Flexible	Actual	Spending
					budget	Budget	variance
		machine hours			23,000	23,000
		fixed	variable
utilities		16,300	0.21		21130	23,350	2220	U
maintenance		38,600	1.2		66200	62,400	3,800	F
supplies			0.6		13800	14,800	1000	U
indirect labor		94,800	1.6		131600	135,700	4100	U
Depreciation		68,400			68,400	70,100	1,700	U
tota			3.61		301130	306,350	5,220	U
	highlighted ones are the answers