After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March: Cost Formula Actual Cost in March Utilities $16,200 + $0.15 per machine-hour $ 20,400 Maintenance $38,900 + $1.50 per machine-hour $ 56,700 Supplies $0.90 per machine-hour $ 14,200 Indirect labor $94,300 + $1.20 per machine-hour $ 114,400 Depreciation $67,800 $ 69,500 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. Prepare a flexible budget for March. 2. Prepare a report showing the spending variances for March
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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
After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March:
| Cost Formula | Actual Cost in March | ||
| Utilities | $16,200 + $0.15 per machine-hour | $ | 20,400 |
| Maintenance | $38,900 + $1.50 per machine-hour | $ | 56,700 |
| Supplies | $0.90 per machine-hour | $ | 14,200 |
| Indirect labor | $94,300 + $1.20 per machine-hour | $ | 114,400 |
| $67,800 | $ | 69,500 | |
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. Prepare a flexible budget for March.
2. Prepare a report showing the spending variances for March.
REQUIRED 1
Prepare a flexible budget for March. (Input all amounts as positive values.)
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REQUIRED 2
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.)
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