Question

Saved Pre-Built Problems Problem 9-20 Activity and Spending Variances [LO9-1, Lo9-2, Lo9-3] by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has u find that the company has never used a flexible budget, and you suggest that preparing such a budget would be You have just been hired 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 an excellent first step in overhead planning and control. arch: After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for M Actual Cost in March 21,800 68,100 $ 9,800 $123,300 s 69,300 Cost Formula Utilities Maintenance Supplies Indirect labor Depreciation $16,200 plus $e.19 per machine-hour $38,3e0 plus $1.80 per machine-hour 0.50 per machine-hour $94,400 plus $1.40 per machine-hour $67,600 nces Durin 20,000 machine-hours during March. g March, the company worked 18,000 machine-hours and produced 12.000 units. The company had originally planned to work 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 Calculate the activity variances for March. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) FAB Corporation

Answer 1

			Activity variance = flexible budget - planned budget
							Activity
					Flexible	planned	Variance
					budget	Budget
		machine hours			18,000	20,000
		fixed	variable
utilities		16,200	0.19		19620	20000	380	F
maintenance		38,300	1.8		70700	74300	3600	F
supplies			0.5		9000	10000	1000	F
indirect labor		94,400	1.4		119600	122400	2800	F
Depreciation		67,600			67,600	67,600	0	U
tota			3.89
			cost formula = machine hours * variable cost per mh + fixed cost
			Spending variance = actual budget - flexible budget
							Spending
					Flexible	Actual	Variance
					budget	Budget
		machine hours			18,000	18,000
		fixed	variable
utilities		16,200	0.19		19620	21,800	2180	U
maintenance		38,300	1.8		70700	68,100	2,600	F
supplies			0.5		9000	9,800	800	U
indirect labor		94,400	1.4		119600	123,300	3700	U
Depreciation		67,600			67,600	69,300	1,700	U
tota			3.89		286520	292,300	5,780	U