You have just been hired by HAB 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 $17,000 + $0.17 per machine-hour $38,600 +$1.20 per machine-hour $0.40 per machine-hour $94,400 + $1.50 per machine-hour $67,600 Actual Cost in March $ 22,200 $ 56,400 $ 7,800 $ 125,300 $ 69,300 During March, the company worked 18,000 machine-hours and produced 12,000 units. The company originally planned to work 20,000 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 HAB 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 $17,000 + $0.17 per machine-hour $38,600 +$1.20 per machine-hour $0.40 per machine-hour $94,400 + $1.50 per machine-hour $67,600 Actual Cost in March $ 22,200 $ 56,400 $ 7,800 $ 125,300 $ 69,300 During March, the company worked 18,000 machine-hours and produced 12,000 units. The company originally planned to work 20,000 machine-hours during March. Required: 1. Calculate the activity variances for March. 2. Calculate the spending variances for March.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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: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
$17,000 + $0.17 per machine-hour
$38,600 $1.20 per machine-hour
$0.40 per machine-hour
$94,400 +$1.50 per machine-hour
$67,600
Actual Cost
in March
$ 22,200
$ 56,400
$ 7,800
$ 125,300
$ 69,300
During March, the company worked 18,000 machine-hours and produced 12,000 units. The company originally planned to work
20,000 machine-hours during March.
Required:
1. Calculate the activity variances for March.
2. Calculate the spending variances for March.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Calculate the activity variances for March.
Note: 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
Activity Variances
For the Month Ended March 31
Maintenance
Supplies
Indirect labor
Depreciation
Total
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