just been hir by 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 $16,400 + 10.14 per machine-hour $38,200+ $1.00 per machine-hour 50.40 per machine-hour 594,200+ 12.00 per machine-hour 567,600 Actual Cost in March $ 21,140 $ 69,000 $ 0,200 $137,100 $ 69,300 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
just been hir by 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 $16,400 + 10.14 per machine-hour $38,200+ $1.00 per machine-hour 50.40 per machine-hour 594,200+ 12.00 per machine-hour 567,600 Actual Cost in March $ 21,140 $ 69,000 $ 0,200 $137,100 $ 69,300 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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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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
$16,400+ $0.14 per machine-hour
$38,200+ $1.00 per machine-hour
$0.40 per machine-hour
594,200+ $2.00 per machine-hour
367,600
Actual
Cost in
March
$ 21,140
$ 69,000
$ 8,200
$137,100
$ 69,300
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.
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