Question

Problem 9-23 Flexible Budgets and Spending Variances [LO9-1, LO9-2] 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: Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $20,600 plus 50.10 per machine-hour $40,000 plus $1.60 per machine-hour $0.30 per machine-hour 5130,000 plus $0.70 per machine-hour $70,000 Actual Cost in March $ 24,200 $ 78,100 $ 8.400 $ 149,600 $ 71,500 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. Prepare a flexible budget for March 2. Prepare a report showing the spending variances for March Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a flexible budget for March. (Input all amounts as positive values.) FAB Corporation Flexible Budget For the Month Ended March 31 Machine hours Utilities Maintenance Supplies Indirect labor Depreciation Required 2 >

Answer 1

FAB Corporation
Flexible budget
For the month ended March 31
		Flexible Budget
Machine hours	(q)	26,000
Utilities	[$20,600 + ($0.10 X q)]	$     23,200
Maintenance	[$40,000 + ($1.60 X q)]	$     81,600
Supplies	($0.30 X q)	$       7,800
Indirect Labor	[$1,30,000 + ($0.70 X q)]	$ 1,48,200
Depreciation	$70,000	$     70,000
Total		$ 3,30,800
Calculation of Spending Variances for March =
FAB Corporation
Activity Variance
For the month ended March 31
		Flexible Budget	Actual results	Spending Variances
Machine hours	(q)	26,000	26,000
Utilities	[$20,600 + ($0.10 X q)]	$     23,200	$     24,200	$       1,000	U
Maintenance	[$40,000 + ($1.60 X q)]	$     81,600	$     78,100	$       3,500	F
Supplies	($0.30 X q)	$       7,800	$       8,400	$           600	U
Indirect Labor	[$1,30,000 + ($0.70 X q)]	$ 1,48,200	$ 1,49,600	$       1,400	U
Depreciation	$70,000	$     70,000	$     71,500	$       1,500	U
Total		$ 3,30,800	$ 3,31,800	$       1,000	U
U=	Unfavorable
F=	Favorable
N=	No effect

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