president you you 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: Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $16,900 plus $0.21 per machine-hour $38,100 plus $1.30 per machine-hour $0.50 per machine-hour $94,800 plus $1.30 per machine-hour $67,600 Actual Cost in March $ 23,530 $ 61,800 $ 11,300 $ 125,600 $ 69,300 During March, the company worked 21,000 machine-hours and produced 15,000 units. The company had originally planned to work 23,000 machine-hours during March.
president you you 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: Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $16,900 plus $0.21 per machine-hour $38,100 plus $1.30 per machine-hour $0.50 per machine-hour $94,800 plus $1.30 per machine-hour $67,600 Actual Cost in March $ 23,530 $ 61,800 $ 11,300 $ 125,600 $ 69,300 During March, the company worked 21,000 machine-hours and produced 15,000 units. The company had originally planned to work 23,000 machine-hours during March.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
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Transcribed Image Text:2. Complete the 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.)
Utilities
FAB Corporation
Spending Variances
For the Month Ended March 31
Maintenance
Supplies
Indirect labor
Depreciation
Total
Transcribed Image Text: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:
Utilities
Maintenance
Supplies
Indirect labor
Cost Formula
$16,900 plus $0.21 per machine-hour
$38,100 plus $1.30 per machine-hour
$0.50 per machine-hour
$94,800 plus $1.30 per machine-hour
Depreciation $67,600
During March, the company worked 21,000 machine-hours and produced 15,000 units. The company had
originally planned to work 23,000 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.)
Total
Actual Cost
in March
$ 23,530
$ 61,800
$ 11,300
$ 125,600
$ 69,300
FAB Corporation
Activity Variances
For the Month Ended March 31
Utilities
Maintenance
Supplies
Indirect labor
Depreciation
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