Question

In: Accounting

You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door...

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 + $0.15 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

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.

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

Solutions

Expert Solution

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*.15) 300 F
Maintenance (2000*1.2) 2400 F
Supplies (2000*.80) 1600 F
Indirect labor 3000 F
Depreciation 0 None
Total 7300 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 (16000*.15+16600-21100) 2100 U
Maintenance 3800 F
Supplies 1400 U
Indirect labor 3900 U
Depreciation 1700 U
Total 5300 U

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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 have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door...
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,...
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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,...
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