You have just been hired by FAB Corporation, the manufacturer of a revolutionary
ID: 2509923 • 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: in Ma $ 23,160 $ 60,800 $ 19,000 $138,500 $ 70,000 $16,800 plus $0.19 per machine-hour Utilities Maintenance $38,200 plus $1.20 per machine-hour Supplies$0.80 per machine-hour Indirect labor $94,400 plus $1.80 per machine-hour Depreciation $68,300 During March, the company worked 22,000 machine-hours and produced 16,000 units. The company had originally planned to work 24,000 machine-hours during March Required: 1. Prepare a flexible budget for March. (indicate the offect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no offect (i.e, zero variance). Input all amounts as positive values.) FAB Corporation Flexible Budget For the Month Ended March 31 Utilities Maintenance Supplies Indirect labor Depreciation TotalExplanation / Answer
Answer
Fixed
Variable [22000 machine hours]
Total for Flexible Budget
Utilities
$ 16,800.00
$ 4,180.00
$ 20,980.00
Maitenance
$ 38,200.00
$ 26,400.00
$ 64,600.00
Supplies
$ 17,600.00
$ 17,600.00
Indirect Labor
$ 94,400.00
$ 39,600.00
$ 1,34,000.00
Depreciation
$ 68,300.00
$ 68,300.00
Total
$ 2,17,700.00
$ 87,780.00
$ 3,05,480.00
U = Unfavourable Variance; F = Favourable
Flexible Budget
Actual Cost
Variance
Utilities
20980
23160
2180
U
Maitenance
64600
60800
3800
F
Supplies
17600
19000
1400
U
Indirect Labor
134000
138500
4500
U
Depreciation
68300
70000
1700
U
Total
$305480
$311460
5980
U
Fixed
Variable [22000 machine hours]
Total for Flexible Budget
Utilities
$ 16,800.00
$ 4,180.00
$ 20,980.00
Maitenance
$ 38,200.00
$ 26,400.00
$ 64,600.00
Supplies
$ 17,600.00
$ 17,600.00
Indirect Labor
$ 94,400.00
$ 39,600.00
$ 1,34,000.00
Depreciation
$ 68,300.00
$ 68,300.00
Total
$ 2,17,700.00
$ 87,780.00
$ 3,05,480.00
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