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 $16,400 + $0.20 per machine-hour $38,100 + $1.30 per machine-hour $0.70 per machine-hour $94,200 + $1.80 per machine-hour $68,200 Actual Cost in March $ 23,200 $ 64,400 $ 17,300 $140,100 $ 69,900 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. 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 Prepare a flexible budget for March. (Input all amounts as positive values.)

Answer 1

Answer:

1.)

					Flexible
					budget
		machine hours		23000
		fixed	variable
utilities		16400	0.20		21000
maintenance	38100	1.30		68000
supplies			0.70		16100
indirect labor	94200	1.80		135600
Depreciation	68200			68,200
total			4		308900

2.)

Report showing Spending Variance

Particulars	Flexible Budget	Actual Results	Spending Variance
Machine Hours (q)	23000	23000
Utilities 16400+(0.20*q)	21000	23200	-2200	Unfavourable
Maintenance 38100+(1.30*q)	68000	64400	3600	Favourable
Supplies (0.70*q)	16100	17300	-1200	Unfavourable
Indirect Labour 94200+(1.80*q)	135600	140100	-4500	Unfavourable
Depreciation	68200	69900	-1700	Unfavourable
Total	308900	314900	-6000	Unfavourable