Question

Problem 9-19 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 After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March: Actual Cost in March Cost Formula $16,700 plus $0.14 per Utilities Maintenance $38,900 plus $2.00 per Supplies $0.70 per machine-hour Indirect 21,580 76.700 15,200 139.700 69.700 $94,800 plus $2.00 per labor Depreciation $68,000 During March, the company worked 20,000 machine-hours and produced 14,000 units. The company had originally planned to work 22,000 s during March. Require 1. Complete the report showing the activity variances for March. (Indicate the effect of d: 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.) Activity Variances For the Month Ended March 31 Utilities Indirect labor Total

Answer 1

Answer-1)-

FAB Corporation
Activity Variance for the month of March 31
Particulars	Planning Budget	Flexible Budget	Difference	Remark
	$	$	$
Utilities	16700+(22000 machine hours*0.14 per hour)=19780	16700+(20000 machine hours*0.14 per hour)=19500	280	Favorable
Maintenance	38900+(22000 machine hours*2.00 per hour)=82900	38900+(20000 machine hours*2.00 per hour)=78900	4000	Favorable
Supplies	22000 machine hours*0.70 per hour=15400	20000 machine hours*0.70 per hour=14000	1400	Favorable
Indirect Labor	94800+(22000 machine hours*2.00 per hour)=138800	94800+(20000 machine hours*2.00 per hour)=134800	4000	Favorable
Depreciation	68000	68000	0	None
Total	324880	315200	9680	Favorable

2)-

FAB Corporation
Spending variance for the month of March 31
Particulars	Flexible Budget	Actual	Difference	Remark
	$	$	$
Utilities	16700+(20000 machine hours*0.14 per hour)=19500	21580	-2080	Unfavorable
Maintenance	38900+(20000 machine hours*2.00 per hour)=78900	76700	2200	Favorable
Supplies	20000 machine hours*0.70 per hour=14000	15200	-1200	Unfavorable
Indirect Labor	94800+(20000 machine hours*2.00 per hour)=134800	139700	-4900	Unfavorable
Depreciation	68000	69700	-1700	Unfavorable
Total	315200	322880	-7680	Unfavorable