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, 100 + $0.21 per machine-hour $38,500 + $1.60 per machine-hour $0.40 per machine-hour $94,200 + $1.20 per machine-hour $68,200 Actual Cost in March $ 22,730 $ 69,100 $ 9,000 $122,700 $ 69,900 During March, the company worked 21,000 machine-hours and produced 15,000 units. The company had originally planned to work 23,000 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. Required 1 Required 2

Answer 1

1
	Planning budget	Flexible budget	Activity variances
Utilities	20930	20510	420	F
Maintenance	75300	72100	3200	F
Supplies	9200	8400	800	F
Indirect labor	121800	119400	2400	F
Depreciation	68200	68200	0	None
Total	295430	288610	6820	F
2
	Actual cost	Flexible budget	Spending variances
Utilities	22730	20510	2220	U
Maintenance	69100	72100	3000	F
Supplies	9000	8400	600	U
Indirect labor	122700	119400	3300	U
Depreciation	69900	68200	1700	U
Total	293430	288610	4820	U