Prepare a report showing the spending variances for march

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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 $0.16 per machine-hour

$21,100

Maintenance

$38,500 plus $1.80 per machine-hour

$68,300

Supplies

$0.30 per machine-hour

$5,800

Indirect labor

$95,000 plus $1.20 per machine-hour

$119,900

Depreciation

$67,700

$69,400

During March, the company worked 18,000 machine-hours and produced 12,000 units. The company had originally planned to work 20,000 machine-hours during March.

Required:

1. Prepare a flexible budget for March.

2. Prepare a report showing the spending variances for March.

Reference no: EM132170286

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