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:
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Cost Formula
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Actual Cost in March
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Utilities
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$16,700 plus $0.11 per machine-hour
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$
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20,370
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Maintenance
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$38,100 plus $1.80 per machine-hour
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$
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62,500
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Supplies
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$0.70 per machine-hour
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$
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11,700
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Indirect labor
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$94,600 plus $2.00 per machine-hour
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$
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129,500
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Depreciation
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$68,100
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$
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69,800
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During March, the company worked 15,000 machine-hours and produced 9,000 units. The company had originally planned to work 17,000 machine-hours during March
Required:
1. Prepare a flexible budget 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.)
2. Prepare a report showing 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.)