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 Actual Cost in March $ 20,900 $ 60,900 $ 14,200 $127,600 $69,300 Cost Formula Utilities Maintenance Supplies Indirect labor Depreciation $67,600 $16,400 plus $0.15 per machine-hour $38,300 plus $1.60 per machine-hour $0.80 per machine-hour $94,300 plus $1.80 per machine-hour During March, the company worked 16,000 machine-hours and produced 10,000 units. The comp originally planned to work 18,000 machine-hours during March any had

Explanation / Answer

1 Flexible budget Utilities 18800 =16400+(16000*0.15) Maintenance 63900 =38300+(16000*1.6) Supplies 12800 =16000*0.8 Indirect labor 123100 =94300+(16000*1.8) Depreciation 67600 Total 286200 2 Spending variances Utilities 2100 U Maintenance 3000 F Supplies 1400 U Indirect labor 4500 U Depreciation 1700 U Total 6700 U

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