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 Cost Formula in March $16,000 plus $0.17 per machine-hour 22,050 Maintenance $38,000 plus $1.50 per machine-hour 69,300 Utilities SuppliesS0.50 per machine-hour Depreciation $68,400 $ 12,300 Indirect labor $94,300 plus $1.80 per machine-hour 140,200 $ 70,100 During March, the company worked 23,000 machine-hours and produced 17,000 units. The company had originally planned to work 25,000 machine-hours during March.

Explanation / Answer

Flexible budget :

Spending variance

Utilities 19910 Maintenance 72500 Supplies 11500 Indirect labour 135700 Depreciation 68400 Total 308010

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