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:

During March, the company worked 16,000 machine-hours and produced 10,000 units. The company had originally planned to work 18,000 machine-hours during March.

Prepare a flexible budget 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.)

     

Prepare a report showing the spending 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.)

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:

Explanation / Answer

1.

2.

FAB Corporation Flexible Budget For the Month of March Flexible Budget Planning Budget Activity Variance Machine-hours 16000 18000 2000 F Utilities 19100 19400 300 F Maintenance 57800 60200 2400 F Supplies 8000 9000 1000 F Indirect labor 125000 128800 3800 F Depreciation 68200 68200 0 None Total 278100 285600 7500 F

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