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 wh and "do what you can to help us get better control of ou 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 $16,200 plus $0.19 per machine-hour $38,500 plus $1.30 per machine-hour $0.70 per machine-hour $95,000 plus $1.10 per machine-hour $68,200 Actual Cost in March $ 21,990 $ 59,600 S 14.500 $119,000 $ 69,900 During March, the company worked 19,000 machine-hours and produced 13,000 units. The company had originally planned to work 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 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 Activity Variances For the Month Ended March 31 Utilities Maintenance Supplies Indirect labor Depreciation Total

Answer 1

Requirement 1						Requirement 2
FAB Corporation						FAB Door Corporation
Flexible Budget						Flexible Budget
For the month ended April 30						For the month ended April 30
	Planning Budget	Flexible Budget	Activity Variances				Flexible Budget	Actual Results	Spending Variance
Machine Hours (q)	21000	19000				Machine Hours (q)	19000	19000
Utilities	$               20,190.00	$                19,810.00	$                    380.00	F		Utilities	$       19,810.00	$     21,990.00	$             2,180.00	U
Maintenance	$              65,800.00	$               63,200.00	$                 2,600.00	F		Maintenance	$      63,200.00	$    59,600.00	$             3,600.00	F
Supplies	$               14,700.00	$               13,300.00	$                 1,400.00	F		Supplies	$       13,300.00	$     14,500.00	$             1,200.00	U
Indirect Labour	$             118,100.00	$             115,900.00	$                 2,200.00	F		Indirect Labour	$     115,900.00	$   119,000.00	$             3,100.00	U
Depreciation	$              68,200.00	$               68,200.00	$                             -	None		Depreciation	$      68,200.00	$    69,900.00	$             1,700.00	U
	$            286,990.00	$             280,410.00	$                 6,580.00	F			$    280,410.00	$ 284,990.00	$             4,580.00	U
Working :
		Flexible Budget				Note : Spending Variance = Flexible buget - Actual Results
Machine Hours (q)	21000	19000
Utilities	16200+0.19*21000	16200+0.19*19000
Maintenance	38500+1.3*21000	38500+1.3*19000
Supplies	0.7*21000	0.7*19000
Indirect Labour	95000+1.1*21000	95000+1.1*19000
Depreciation	$              68,200.00	$               68,200.00