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:     Cost Formula Actual Cost in March Utilities $20,600 + $0.10 per machine-hour $ 24,200 Maintenance $40,000 + $1.60 per machine-hour $ 78,100 Supplies $0.30 per machine-hour $ 8,400 Indirect labor $130,000 + $0.70 per machine-hour $ 149,600 Depreciation $70,000 $ 71,500     During March, the company worked 26,000 machine-hours and produced 15,000 units. The company had originally planned to work 30,000 machine-hours during March.   Required: 1. Prepare a flexible budget for March. 2. Prepare a report showing the spending variances for March.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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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:

 

  Cost Formula Actual Cost in March
Utilities $20,600 + $0.10 per machine-hour $ 24,200
Maintenance $40,000 + $1.60 per machine-hour $ 78,100
Supplies $0.30 per machine-hour $ 8,400
Indirect labor $130,000 + $0.70 per machine-hour $ 149,600
Depreciation $70,000 $ 71,500
 

 

During March, the company worked 26,000 machine-hours and produced 15,000 units. The company had originally planned to work 30,000 machine-hours during March.

 

Required:

1. Prepare a flexible budget for March.

2. Prepare a report showing the spending variances for March.

 

 

FAB Corporation
Flexible Budget
For the Month Ended March 31
Machine-hours
Utilities
Maintenance
Supplies
Indirect labor
Depreciation
Total
Transcribed Image Text:FAB Corporation Flexible Budget For the Month Ended March 31 Machine-hours Utilities Maintenance Supplies Indirect labor Depreciation Total
FAB Corporation
Spending Variances
For the Month Ended March 31
Utilities
Maintenance
Supplies
Indirect labor
Depreciation
Total
Transcribed Image Text:FAB Corporation Spending Variances For the Month Ended March 31 Utilities Maintenance Supplies Indirect labor Depreciation Total
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