You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president asked you to review the company's costing system and "do what you can to help us get better control of our manufacturing overhead costs." You find the company has never used a flexible budget, and you suggest preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you estimated the following cost formulas and gathered the following actual cost data for March: Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $16,500 $0.16 per machine-hour $38,200 $1.90 per machine-hour $0.30 per machine-hour $94,400+ $1.90 per machine-hour $68,400 Actual Cost in March $ 21,020 $ 64,300 $ 4,900 $ 127,600 $ 70,100 During March, the company worked 15,000 machine-hours and produced 9,000 units. The company originally planned to work 17,000 machine-hours during March. Required: 1. Calculate the activity variances for March. 2. Calculate the spending variances for March.

You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president asked you to review the company's costing system and "do what you can to help us get better control of our manufacturing overhead costs." You find the company has never used a flexible budget, and you suggest preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you estimated the following cost formulas and gathered the following actual cost data for March: Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $16,500 $0.16 per machine-hour $38,200 $1.90 per machine-hour $0.30 per machine-hour $94,400+ $1.90 per machine-hour $68,400 Actual Cost in March $ 21,020 $ 64,300 $ 4,900 $ 127,600 $ 70,100 During March, the company worked 15,000 machine-hours and produced 9,000 units. The company originally planned to work 17,000 machine-hours during March. Required: 1. Calculate the activity variances for March. 2. Calculate the spending variances for March.

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Description: You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The presidentasked you to review the company's costing system and "do what you can to help us get better control of our manufacturing ov

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

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.

Topic Video

Question

You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president
asked you to review the company's costing system and "do what you can to help us get better control of our manufacturing overhead
costs." You find the company has never used a flexible budget, and you suggest preparing such a budget would be an excellent first
step in overhead planning and control.
After much effort and analysis, you estimated the following cost formulas and gathered the following actual cost data for March:
Actual Cost
in March.
$ 21,020
$ 64,300
$ 4,900
Utilities
Maintenance.
Supplies
Indirect labor
Depreciation
$16,500
$38,200
Cost Formula
$0.16 per machine-hour
$1.90 per machine-hour
$0.30 per machine-hour
$94,400 $1.90 per machine-hour
$68,400
$ 127,600
$ 70,100
During March, the company worked 15,000 machine-hours and produced 9,000 units. The company originally planned to work 17,000
machine-hours during March.
Required:
1. Calculate the activity variances for March.
2. Calculate the spending variances for March.

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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: Actual Cost in March $ 22,840 Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $16,900 + $0.18 per machine-hour $39,000 + $1.20 per machine-hour $0.50 per machine-hour $94,200 + $1.60 per machine-hour $67,600 $ 60,400 $ 11,300 $ 131,900 $ 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.…
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