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 $16,400 plus $0.12 per machine-hour $ 20,480 Maintenance $38,200 plus $2.00 per machine-hour $ 70,000 Supplies $0.60 per machine-hour $ 11,200 Indirect labor $94,600 plus $1.10 per machine-hour $ 116,400 Depreciation $68,200 $ 69,900 During March, the company worked 17,000 machine-hours and produced 11,000 units. The company had originally planned to work 19,000 machine-hours during March. Required: 1. Calculate the activity variances for March. - I have this answer! 2. Calculate the spending variances for March. - I'm not getting this answer correct and need help.
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 | $16,400 plus $0.12 per machine-hour | $ | 20,480 |
| Maintenance | $38,200 plus $2.00 per machine-hour | $ | 70,000 |
| Supplies | $0.60 per machine-hour | $ | 11,200 |
| Indirect labor | $94,600 plus $1.10 per machine-hour | $ | 116,400 |
| $68,200 | $ | 69,900 | |
During March, the company worked 17,000 machine-hours and produced 11,000 units. The company had originally planned to work 19,000 machine-hours during March.
Required:
1. Calculate the activity variances for March. - I have this answer!
2. Calculate the spending variances for March. - I'm not getting this answer correct and need help.
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