Question

Stuck on these last few.

Problem 9-23 Flexible Budgets and Spending Variances (LO9-1, LO9-2] 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, 380 plus $0.20 per machine-hour $38,680 plus $1.88 per machine-hour $0.40 per machine-hour $94,780 plus $1.50 per machine-hour $67,600 Actual Cost in March $ 21,900 $ 66,600 $ 7,400 $124,100 $ 69,300 During March, the company worked 17,000 machine-hours and produced 11,000 units. The company had originally planned to work 19.000 machine-hours during March. Required: 1. Prepare a flexible budget for March 2. Prepare a report showing the spending variances for March. Complete this question by entering your answers in the tabs below. Required 1 Required 2

Answer 1

Flexible budget for March,

Particulars	Amount
Machine Hours	17,000 (Hours)
Utilities	19,900
Maintenance	69,200
Supplies	6,800
Indirect Labour	1,20,200
Depreciation	67,600
Total	2,83,700

Working/Calculation for Flexible budget,

1. Machine Hours - Actual Machine hour worked i.e.17,000 hour

2. Utilities - As per cost formula 16,500 is fixed and additional 0.20 for each hour therefore 0.20*17,000= 3,400 hence total revised amount is 19,900 (16500+3400)

3. Maintenance - Fixed 38,600 and additional 1.8 for each hr therefore 1.8*17,000= 30,600 hence total revised amount is 69,200 (38600+30600)

4. Supplies - 0.40 for each hr hence revised amount is 6,800 (0.40*17000)

5. Indirect Labour - Fixed 94,700 and additional 1.5 for each hr therefore 1.5*17,000= 25,500 hence total revised amount is 1,20,200 (94700+25500)

6. Revised Depreciation is 67,600