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: Cost Formula Utilities $16,300 plus $0.21 per machine-hour Maintenance $38,600 plus $1.20 per machine-hour Supplies $0.60 per machine-hour Indirect labor $94,800 plus $1.60 per machine-hour Depreciation $68,400 Actual Cost in March $ 23,350 $ 62,400 $ 14,800 $ 135,700 $ 70,100 During March, the company worked 23,000 machine-hours and produced 17,000 units. The company had originally planned to work 25,000 machine-hours during March.

Answer 1

FAB CORPORATION
Flexible Budget
for the month ended March 31
Utilities	21,580.00
Maintenance	68,600.00
Supplies	15,000.00
Indirect Labor	134,800.00
Depreciation	68,400.00
Total	308,380.00

FAB CORPORATION
Spending Variances
for the month ended March 31
Utilities	1770	F
Maintenance	6200	U
Supplies	200	U
Indirect Labor	900	F
Depreciation	1700	F
Total	10770

Working Note

Particulars	Hours (Planned)	Fixed	Variable	Variable Cost	Flexible Budget Cost	Actual Cost (Given In Question)	Spending Variances	F/U
Utilities	25000	16,330.00	0.21	5,250.00	21,580.00	23,350.00	1,770.00	F
Maintenance	25000	38,600.00	1.20	30,000.00	68,600.00	62,400.00	-6,200.00	U
Supplies	25000	0.00	0.60	15,000.00	15,000.00	14,800.00	-200.00	U
Indirect Labor	25000	94,800.00	1.60	40,000.00	134,800.00	135,700.00	900.00	F
Depreciation	25000	68,400.00		0.00	68,400.00	70,100.00	1,700.00	F