All applicable problems are available with McGraw-Hill\'s Connect® Accounting. P

Question

All applicable problems are available with McGraw-Hill's Connect® Accounting. PROBLEM 9-19 Activity and Spending Variances [L09-1, L09-2, L09-3] 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 Cost Formula Utilities $20,600 plus $0.10 per machine-hour Maintenance. $40,000 plus $1.60 per machine-hour Supplies . .$0.30 per machine-hour Indirect labor $24,200 $78,100 $8,400 $130,000 plus $0.70 per machine-hour $149,600 $71,500 ng March, the company worked 26,000 machine-hours and produced 15,000 units. The com pany had oniginally planned to work 30,000 machine-hours during March. Required: epare a report showing the activity variances for March. Explain what these variances mean. a report showing the spending variances for March. Explain what these variances mean. Prepare

Explanation / Answer

1) Activity variance :

2) Spending variance

Utilities 400 F Maintenance 6400 F Supplies 1200 F Indirect labour 2800 F Depreciation None Total 10800 F

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