1. Calculate the activity variances for March. 2. Calculate the spending variances for March. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the activity variances for March. Note: 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. FAB Corporation Activity Variances
1. Calculate the activity variances for March. 2. Calculate the spending variances for March. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the activity variances for March. Note: 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. FAB Corporation Activity Variances
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:**Title: Implementing a Flexible Budget for Manufacturing Overhead Control**
**Introduction:**
You have been hired by FAB Corporation, a company manufacturing a revolutionary garage door opening device. Your task is to analyze and revamp the company’s costing system to improve control over manufacturing overhead costs. Notably, the company has yet to use a flexible budget, which could significantly enhance overhead planning and control.
**Cost Analysis and Formulas:**
Following detailed efforts and analysis, you have developed cost formulas and compiled actual cost data for March. Below is the breakdown:
| **Cost Component** | **Cost Formula** | **Actual Cost in March** |
|--------------------|--------------------------------|--------------------------|
| Utilities | $16,700 + $0.15 per machine-hour| $20,900 |
| Maintenance | $38,800 + $1.50 per machine-hour| $56,600 |
| Supplies | $0.60 per machine-hour | $9,400 |
| Indirect labor | $94,600 + $1.30 per machine-hour| $116,300 |
| Depreciation | Fixed | $67,700 |
**Operational Data:**
- In March, the company utilized 14,000 machine-hours and produced 8,000 units.
- The initial plan anticipated using 16,000 machine-hours during March.
**Conclusion:**
By introducing a flexible budget, FAB Corporation can potentially align its actual operational performance against planned activities, enabling better management and control of overhead costs. This approach is particularly beneficial in adapting to variations in operational activities, such as changes in machine-hour usage.
**Next Steps:**
Implementing the flexible budget will require monitoring the differences between planned and actual machine hours and adjusting the cost formulas accordingly. This continuous evaluation will facilitate more accurate cost management and improve overall financial performance.

Transcribed Image Text:### Instructions for Variance Calculations
1. **Calculate the activity variances for March.**
2. **Calculate the spending variances for March.**
#### Steps to Follow
Please complete the following calculations by entering your answers in the designated tabs below.
**Required 1** | **Required 2**
#### Task for Required 1
- **Calculate the activity variances for March.**
**Note:** 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.
---
#### Variance Calculation Table
**FAB Corporation**
**Activity Variances**
For the Month Ended March 31
| Category | Amount | Effect (F/U/None) |
|------------------|--------|------------------|
| Utilities | | |
| Maintenance | | |
| Supplies | | |
| Indirect labor | | |
| Depreciation | | |
| **Total** | | |
---
Ensure accuracy in calculating and assigning variances, as this affects financial assessments and strategic planning within the FAB Corporation. Use this guide to systematically determine the financial performance for the specified period.
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