You have just been hired by FAB Corporation, the manufacturer of a revolutionary
ID: 2400207 • Letter: Y
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 13,000 machine-hours and produced 7,000 units. The company had originally planned to work 15,000 machine-hours during March.
Complete the report showing 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.)
Complete the report showing the spending 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.)
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:
Explanation / Answer
Planning budget Flexible budget Activity variances Machine hours 15000 13000 Utilities 19000 18640 360 F Maintenance 63800 60400 3400 F Supplies 13500 11700 1800 F Indirect labor 114000 111400 2600 F Depreciation 68200 68200 0 None Total expense 278500 270340 8160 F Actual Flexible budget Spending variances Machine hours 13000 13000 Utilities 20800 18640 2160 U Maintenance 57600 60400 2800 F Supplies 13300 11700 1600 U Indirect labor 114900 111400 3500 U Depreciation 69900 68200 1700 U Total expense 276500 270340 6160 U
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