Flexible Budgets and Spending Variances
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 tiat you can to help us get better control of our
After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March:
During March, the company worked 26.000 machine-hours and produced 15.000 units. The company had originally planned to work 30,000 machine-hours during March.
Required:
1. Using Exhibit 9−2 as your guide, prepare a flexible budget for March.
2. Using Exhibit 9-6 as your guide, prepare a report showing the spending variances for March. Explain what these variances mean.
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Introduction To Managerial Accounting
- 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: Actual Cost in March $ 21,540 $ 52,900 Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $16,700 + $0.16 per machine-hour $38,200 + $1.10 per machine-hour $0.80 per machine-hour $94,200+ $1.40 per machine-hour $68, 200 $ 15,000 $ 121,700 $ 69,900 During March, the company worked 17,000 machine-hours and produced 11,000 units. The company had originally planned to work 19,000 machine-hours during March.…arrow_forwardYou 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: Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $17,000+ $0.12 per machine-hour $38,300+ $1.70 per machine-hour $0.50 per machine-hour 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.…arrow_forwardYou 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 Utilities $16,200 + $0.21 per machine-hour Maintenance $38,900 + $1.20 per machine-hour Supplies $0.80 per machine-hour Indirect labor $94,300 + $1.30 per machine-hour Depreciation $67,500 Actual Cost in March $ 21,990 $ 55,500 $ 15,000 $ 119,900 $ 69,200 During March, the company worked 17,000 machine-hours and produced 11,000 units. The company had originally planned to work 19,000 machine-hours during March.…arrow_forward
- 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 FormulaActual Cost in MarchUtilities$17,000 + $0.12 per machine-hour$ 21,080Maintenance$38,500 + $1.30 per machine-hour$ 57,000Supplies$0.60 per machine-hour$ 11,200Indirect labor$94,500 + $1.60 per machine-hour$ 125,800Depreciation$68,300$ 70,000 During March, the company worked 17,000 machine-hours and produced 11,000 units. The company had originally planned to work 19,000 machine-hours during March. Required:1.…arrow_forwardYou 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: Actual Cost in March $ 22, 200 $ 78, 300 $ 16,600 $ 128,600 $ 70,100 Cost Formula $16,800 + $0.15 per machine-hour $38,900 + $1.98 per machine-hour $0.70 per machine-hour $94,100 + $1.40 per machine-hour $68,400 Utilities Maintenance Supplies Indirect labor Depreciation During March, the company worked 22,000 machine-hours and produced 16,000 units. The company had originally planned to work 24,000 machine-hours during…arrow_forwardYou 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 $16,000 + $0.12 per machine-hour $ 19,720 Maintenance $38,900 + $2.10 per machine-hour $ 66,300 Supplies $0.60 per machine-hour $ 9,400 Indirect labor $94,400 + $1.20 per machine-hour $ 114,500 Depreciation $67,800 $ 69,500 During March, the company worked 14,000 machine-hours and produced 8,000 units. The company had originally planned to work 16,000…arrow_forward
- 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 $16,000 + $0.12 per machine-hour $ 19,720 Maintenance $38,900 + $2.10 per machine-hour $ 66,300 Supplies $0.60 per machine-hour $ 9,400 Indirect labor $94,400 + $1.20 per machine-hour $ 114,500 Depreciation $67,800 $ 69,500 During March, the company worked 14,000 machine-hours and produced 8,000 units. The company had originally planned to work 16,000…arrow_forwardYou 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: Utilities Maintenance Supplies Indirect labor Depreciation. Cost Formula $16,800+ $0.12 per machine-hour $38,700+ $2.10 per machine-hour $0.50 per machine-hour $94,600+ $1.40 per machine-hour $68,400 During March, the company worked 22,000 machine-hours and produced 16,000 units. The company had originally planned to work 24,000 machine-hours during March. Required: 1. Calculate the activity variances for March. 2.…arrow_forwardYou 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: Actual Cost in March $ 21,010 $ 54,900 $ 16,600 $135,000 $ 69,700 Utilities Maintenance Supplies Indirect labor Depreciation During March, the company worked 19,000 machine-hours and produced 13,000 units. The company had originally planned to work 21,000 machine-hours during March. Required: 1. Calculate the activity variances for March. 2. Calculate the spending variances for March. Cost Formula $16,900 + $0.11 per…arrow_forward
- 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 $16,300 + $0.18 per machine-hour $ 21,520 Maintenance $38,500 + $2.00 per machine-hour $ 70,300 Supplies $0.50 per machine-hour $ 9,300 Indirect labor $94,100 + $1.50 per machine-hour $ 123,500 Depreciation $68,200 $ 69,900 During March, the company worked 17,000 machine-hours and produced 11,000 units. The company had originally planned to work 19,000…arrow_forwardYou 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 $16,300 + $0.18 per machine-hour $ 21,520 Maintenance $38,500 + $2.00 per machine-hour $ 70,300 Supplies $0.50 per machine-hour $ 9,300 Indirect labor $94,100 + $1.50 per machine-hour $ 123,500 Depreciation $68,200 $ 69,900 During March, the company worked 17,000 machine-hours and produced 11,000 units. The company had originally planned to work 19,000…arrow_forwardYou 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: Actual Cost in March $ 22,180 $ 75,300 $ 16,600 $ 131,000 $ 69,200 Utilities Maintenance Supplies Indirect labor Depreciation During March, the company worked 22,000 machine-hours and produced 16,000 units. The company had originally planned to work 24,000 machine-hours during March. Cost Formula $16,300 + $0.17 per machine-hour $38,300+ $1.80 per machine-hour $0.70 per machine-hour Required: 1. Prepare a flexible budget…arrow_forward
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