ou 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:     Cost Formula Actual Cost in March Utilities $16,400 + $0.13 per machine-hour $ 21,450 Maintenance $38,600 + $1.60 per machine-hour $ 72,400 Supplies $0.80 per machine-hour $ 19,800 Indirect labor $94,700 + $1.60 per machine-hour $ 135,600 Depreciation $68,400 $ 70,100   During March, the company worked 23,000 machine-hours and produced 17,000 units. The company had originally planned to work 25,000 machine-hours during March.   Required: 1. Calculate the activity variances for March. 2. Calculate the spending variances for March.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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ou 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:

 

  Cost Formula Actual Cost in March
Utilities $16,400 + $0.13 per machine-hour $ 21,450
Maintenance $38,600 + $1.60 per machine-hour $ 72,400
Supplies $0.80 per machine-hour $ 19,800
Indirect labor $94,700 + $1.60 per machine-hour $ 135,600
Depreciation $68,400 $ 70,100

 

During March, the company worked 23,000 machine-hours and produced 17,000 units. The company had originally planned to work 25,000 machine-hours during March.

 

Required:

1. Calculate the activity variances for March.

2. Calculate the spending variances for March.

FAB Corporation
Activity Variances
For the Month Ended March 31
Utilities
Maintenance
Supplies
Indirect labor
Depreciation
Total
Transcribed Image Text:FAB Corporation Activity Variances For the Month Ended March 31 Utilities Maintenance Supplies Indirect labor Depreciation Total
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