Problem 9-19 Activity and Spending Variances [LO9-1, LO9-2, LO9-3] You have just

Question

Problem 9-19 Activity and Spending Variances [LO9-1, LO9-2, LO9-3] 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 excel lent 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 Utilities Supplies Depreciation $68,200 in March 17,000 plus $0.20 per machine-hour S 22,000 Maintenance $39,000 plus $1.70 per machine-hour S 60,000 S 11,000 Indirect labor $94,800 plus $1.80 per machine-hour 121,100 S 69,900 0.70 per machine-hour During March, the company worked 14,000 machine-hours and produced 8,000 units. The company had originally planned to work 16,000 machine-hours during March. Required 1. 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.) Activity Variances For the Month Ended March 31 Utilities 400 Supplies Indirect labor Total

Explanation / Answer

Answer 1. FAB Corporation Activity Variances For the Month Ended Mar 31 Planning Budget Flexible Budget Activity Variance Machine Hours - (q)         16,000.00        14,000.00 Utilities - $17,000 + 0.20 q         20,200.00        19,800.00          400.00 (F) Maintenace - $39,000 + $1.70 q         66,200.00        62,800.00       3,400.00 (F) Supplies - $0.70 q         11,200.00          9,800.00       1,400.00 (F) Indirect Labor - $94,600 + $1.60 q       120,200.00      117,000.00       3,200.00 (F) Depreciation         68,200.00        68,200.00                    -   (F) Total       286,000.00      277,600.00       8,400.00 (F) Answer 2. FAB Corporation Spending Variances For the Month Ended Mar 31 Flexible Budget Actual   Spending Variance Machine Hours - (q)         14,000.00        14,000.00 Utilities - $17,000 + 0.20 q         19,800.00        22,000.00       2,200.00 (U) Maintenace - $39,000 + $1.70 q         62,800.00        60,000.00       2,800.00 (F) Supplies - $0.70 q            9,800.00        11,000.00       1,200.00 (U) Indirect Labor - $94,600 + $1.60 q       117,000.00      121,100.00       4,100.00 (U) Depreciation         68,200.00        69,900.00       1,700.00 (U) Total       277,600.00      284,000.00       6,400.00 (U)

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