You have just been hired by FAB Corporation, the manufacturer of a revolutionary
ID: 2453943 • 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 21,000 machine-hours and produced 15,000 units. The company had originally planned to work 23,000 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
1 2 Budget Actuals Variance(Budget- Actuals) Spending Variance=Actual costs- (Actual hrs.* Budgeted Rate) Utilities 19680 21480 1800 U (21480-16000)-(21000*0.16)= 2120 U Maintenance 68700 62500 6200 F (62500-38800)-(21000*1.3) 3600 F Supplies 6900 6700 200 F 6700-(21000*0.3) 400 U Indirect labor 119300 120200 900 U (120200-94000)-(21000*1.10) 3100 U Depreciation 68200 69900 1700 U 69900-68200= 1700 U
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