G MyOTC-Ozarks Technic × ec Secure | https M McGraw Hill C You have just been hired by FAB Corporation, the manufacturer of a revolutionary new asked that you review the company\'s costing system and \"do what you can to help us get better control of our manufacturing 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 garage door opening device. The president has costs\" You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be 3.33 March Cost in March $16 $38,990 plus $1.50 per nachine-hour $8.80 per machine-hour $ 59,700 s 14,280 $123,990 s 69,300 Supplies ct labor $94,208 plus $1.60 per machine hour Depreciation $67,688 During March, the company worked 16,000 machine-hours and produced 10 000 units The company had originalty planned to work 18,000 machine-hours during March. equired: 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 f unfavorable, and \"None for no effect (i.e., zero variance). Input all amounts as positive values.) Activity Variances 31 K Prey 8 of9 Next > Type here to search
We will first compute the flexible budget and the planning budget. Flexible budget will be based on 16,000 machine hours and 10,000 units. Planning budget will be based on 18,000 machine hours.
1. Activity variance = planning budget - flexible budget amounts
When amount of flexible budget < planning budget the variance is favorable, otherwise unfavorable. For instance the activity variance for utilities = 19060-18820 = 240. This will be favorable
2. Spending variance = actual results - flexible budget. if actuals>flexible budget amount then variance is unfavorable.
[Please note that actual utilities cost that I have taken is 20860. The image is slightly blurred and it could even be 20850. If its 20850 then spending variance for utilities will be = 2030 (U) and total spending variance = 6030 (U)]
| Actual results | Flexible budget | Planning budget |
| Machine hours (q) | 16,000.00 | 16,000.00 | 18,000.00 |
| Utilities (16900+0.12q) | 20,860.00 | 18,820.00 | 19,060.00 |
| Maintenance (38900+1.5q) | 59,700.00 | 62,900.00 | 65,900.00 |
| Supplies (0.8q) | 14,200.00 | 12,800.00 | 14,400.00 |
| Indirect labor (94200+1.6q) | 123,900.00 | 119,800.00 | 123,000.00 |
| Depreciation | 69,300.00 | 67,600.00 | 67,600.00 |
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