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 $16,600 + $0.13 per machine-hour $ 20,740 Maintenance $38,200 + $1.10 per machine-hour $ 51,800 Supplies $0.40 per machine-hour $ 7,000 Indirect labor $94,000 + $1.90 per machine-hour $ 129,100 Depreciation $67,700 $ 69,400 During March, the company worked 16,000 machine-hours and produced 10,000 units. The company had originally planned to work 18,000 machine-hours during March.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and 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 | $16,600 + $0.13 per machine-hour | $ | 20,740 |
| Maintenance | $38,200 + $1.10 per machine-hour | $ | 51,800 |
| Supplies | $0.40 per machine-hour | $ | 7,000 |
| Indirect labor | $94,000 + $1.90 per machine-hour | $ | 129,100 |
| $67,700 | $ | 69,400 | |
During March, the company worked 16,000 machine-hours and produced 10,000 units. The company had originally planned to work 18,000 machine-hours during March.
Required:
1. Calculate the activity variances for March.
2. Calculate the spending variances for March.
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