Question

Problem 9-20 Activity and Spending Variances [LO9-1, LO9-2, LO9-3) 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. ok After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March: nt Actual Cost irn March 21,990 $ 65,900 14,500 Cost Formula Utilities Maintenance Supplies $16,200 plus $0.19 per machine-hour $38,500 plus $1.60 per machine-hour nces $0.70 per machine-hour Indirect labor $94,100 plus 1.40 per machine-hour $124,400 Depreciation$68,200 69,900 During March, the company worked 19,000 machine-hours and produced 13,000 units. The company had originally planned to swork 21,000 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 1Required 2 Calculate the activity variances for March. (Indicate the effect of each variance by selecting "F" for fav unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) FAB Corporation K Prev18 of 19 Next>

Answer 1

Particulars	Cost formula	Actual	Spending variance		Flexible budget	Activity variance		Static budget
Machine hours		19000			19000			21000
Expenses
Utilities	16200+.19q	21990	2180	U	19810	380	F	20190
Maintenance	38500+1.6q	65900	3000	F	68900	3200	F	72100
Supplies	.7q	14500	1200	U	13300	1400	F	14700
Indirect labor	94100+1.4q	124400	3700	U	120700	2800	F	123500
Depreciation	68200	69900	1700	U	68200	0		68200
Total expense		296690	5780	U	290910	7780	F	298690