You have just been hired by FAB Corporation, the manufacturer of a revolutionary

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:

During March, the company worked 14,000 machine-hours and produced 8,000 units. The company had originally planned to work 16,000 machine-hours during March.

Required:

1. Calculate the activity variances for March.

2. Calculate the spending variances for March.

Cost Formula Actual Cost in March Utilities $16,500 plus $0.17 per machine-hour $ 21,020 Maintenance $38,700 plus $1.30 per machine-hour $ 53,300 Supplies $0.60 per machine-hour $ 9,400 Indirect labor $94,200 plus $1.30 per machine-hour $ 115,900 Depreciation $67,900 $ 69,600 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

Explanation / Answer

Activity variance :

Spending variance :

Utilities 340 F Maintenance 2600 F Supplies 1200 F Indirect labour 2600 F Depreciation 0 None Total 6740 F

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.