You have just been hired by FAB Corporation, the manufacturer ofa revolutionary new garage door opening device. The president hasasked that you review the company’s costing system and “do what youcan to help us get better control of our manufacturing overheadcosts.” You find that the company has never used a flexible budget,and you suggest that preparing such a budget would be an excellentfirst step in overhead planning and control.
After much effort and analysis, you determined the followingcost formulas and gathered the following actual cost data forMarch:
| Cost Formula | Actual Cost in March |
| Utilities | $16,600 + $0.15 per machine-hour | $ | 21,100 |
| Maintenance | $38,400 + $1.20 per machine-hour | $ | 53,800 |
| Supplies | $0.80 per machine-hour | $ | 14,200 |
| Indirect labor | $94,200 + $1.50 per machine-hour | $ | 122,100 |
| Depreciation | $67,500 | $ | 69,200 |
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During March, the company worked 16,000 machine-hours andproduced 10,000 units. The company had originally planned to work18,000 machine-hours during March.
Required:
1. Calculate the activity variances for March.
2. Calculate the spending variances for March.
Calculate the activity variances for March. (Indicate the effectof each variance by selecting "F" for favorable, "U" forunfavorable, and "None" for no effect (i.e., zero variance). Inputall amounts as positive values.)
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| | FAB Corporation | | Activity Variances | | For the Month Ended March 31 | | Utilities | | | | Maintenance | | | | Supplies | | | | Indirect labor | | | | Depreciation | | | | Total | | |
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Calculate the spending variances for March. (Indicate the effectof each variance by selecting "F" for favorable, "U" forunfavorable, and "None" for no effect (i.e., zero variance). Inputall amounts as positive values.)
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| | FAB Corporation | | Spending Variances | | For the Month Ended March 31 | | Utilities | | | | Maintenance | | | | Supplies | | | | Indirect labor | | | | Depreciation | | | | Total | | |
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