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 | $16,800 plus $0.15 per machine-hour | $ | 21,450 |
| Maintenance | $38,900 plus $1.30 per machine-hour | $ | 57,400 |
| Supplies | $0.60 per machine-hour | $ | 11,200 |
| Indirect labor | $94,900 plus $2.00 per machine-hour | $ | 133,800 |
| Depreciation | $68,300 | $ | 70,000 |
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During March, the company worked 17,000 machine-hours andproduced 11,000 units. The company had originally planned to work19,000 machine-hours during March.
Required:
1. Complete the report showing the activity variances for March.(Indicate the effect of each variance by selecting "F" forfavorable, "U" for unfavorable, and "None" for no effect (i.e.,zero variance). Input all amounts as positive values.)
2. Complete the report showing the spending variances for March.(Indicate the effect of each variance by selecting "F" forfavorable, "U" for unfavorable, and "None" for no effect (i.e.,zero variance). Input all amounts as positive values.)
