Question

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	$16,100 plus $0.17 per machine-hour	$	22,150
Maintenance	$38,900 plus $1.30 per machine-hour	$	65,200
Supplies	$0.80 per machine-hour	$	19,800
Indirect labor	$94,900 plus $1.30 per machine-hour	$	128,300
Depreciation	$67,800	$	69,500

During March, the company worked 23,000 machine-hours and produced 17,000 units. The company had originally planned to work 25,000 machine-hours during March.

Calculate the activity variances for March. (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.)

	FAB Corporation Activity Variances For the Month Ended March 31 Utilities Maintenance Supplies Indirect labor Depreciation Total

Calculate the spending variances for March. (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.)

	FAB Corporation Spending Variances For the Month Ended March 31 Utilities Maintenance Supplies Indirect labor Depreciation Total

Answer 1

Calculate the activity variances for March. (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.)

	FAB Corporation Activity Variances For the Month Ended March 31 Utilities (2000*0.17) 340 F Maintenance (2000*1.3) 2600 F Supplies (2000*.80) 1600 F Indirect labor (2000*1.3) 2600 F Depreciation 0 None Total 7140 F

Calculate the spending variances for March. (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.)

	FAB Corporation Spending Variances For the Month Ended March 31 Utilities (23000*.17+16100-22150) 2140 U Maintenance (23000*1.3+38900-65200) 3600 F Supplies (23000*.80-19800) 1400 U Indirect labor (23000*1.3+94900-128300) 3500 U Depreciation (67800-69500) 1700 U Total 5140 U