You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president asked you to review the company's costing system and "do what you can to help us get better control of our manufacturing overhead costs." You find the company has never used a flexible budget, and you suggest preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you estimated the following cost formulas and gathered the following actual cost data for March: Utilities Cost Formula $20,600 $0.10 per machine-hour Actual Cost in March $ 24.200

You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president asked you to review the company's costing system and "do what you can to help us get better control of our manufacturing overhead costs." You find the company has never used a flexible budget, and you suggest preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you estimated the following cost formulas and gathered the following actual cost data for March: Utilities Cost Formula $20,600 $0.10 per machine-hour Actual Cost in March $ 24.200

Name: None You have just been hired by FAB Corporation, the manufacturer of
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Description: None You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The presidentasked you to review the company's costing system and "do what you can to help us get better control of our manufacturin

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

Problem 40P: The controller for Muir Companys Salem plant is analyzing overhead in order to determine appropriate...

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Concept explainers

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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Question

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You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president
asked you to review the company's costing system and "do what you can to help us get better control of our manufacturing overhead
costs." You find the company has never used a flexible budget, and you suggest preparing such a budget would be an excellent first
step in overhead planning and control.
After much effort and analysis, you estimated the following cost formulas and gathered the following actual cost data for March:
Utilities
Maintenance
Supplies
Indirect labor
Depreciation
Cost Formula
$20,600 + $0.10 per machine-hour
$40,000 +$1.60 per machine-hour
$0.30 per machine-hour
$130,000 + $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 originally planned to work
30,000 machine-hours during March.
Required:
1. Calculate the activity variances for March.
2. Calculate the spending variances for March.

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You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president asked you to review the company's costing system and "do what you can to help us get better control of our manufacturing overhead costs." You find the company has never used a flexible budget, and you suggest preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you estimated the following cost formulas and gathered the following actual cost data for March: Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $16,900 + $0.15 per machine-hour $38,600 + $1.80 per machine-hour $0.30 per machine-hour $94,300 + $1.30 per machine-hour $67,500 Actual Cost in March $ 21,400 $ 64,800 $ 5,200 $ 118,600 $ 69,200 During March, the company worked 16,000 machine-hours and produced 10,000 units. The company originally planned to work 18,000 machine-hours during March. Required: 1.…
You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president asked you to review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find the company has never used a flexible budget, and you suggest preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you estimated the following cost formulas and gathered the following actual cost data for March: Cost Formula Actual Cost in March Utilities $16,700 + $0.17 per machine-hour $ 21,900 Maintenance $38,400 + $1.70 per machine-hour $ 66,200 Supplies $0.50 per machine-hour $ 9,800 Indirect labor $94,400 + $1.80 per machine-hour $ 131,300 Depreciation $68,000 $ 69,700
You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president asked you to review the company's costing system and "do what you can to help us get better control of our manufacturing overhead costs." You find the company has never used a flexible budget, and you suggest preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you estimated the following cost formulas and gathered the following actual cost data for March: Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $16,200 + $0.17 per machine-hour $38,700 +$1.50 per machine-hour $0.70 per machine-hour $94,300 +$1.10 per machine-hour $68,100 Actual Cost in March $ 21,570 $ 64,000 $ 14,500 $ 118,300 $ 69,800 During March, the company worked 19,000 machine-hours and produced 13,000 units. The company originally planned to work 21,000 machine-hours during March. Required: 1. Calculate…
You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president asked you to review the company's costing system and "do what you can to help us get better control of our manufacturing overhead costs." You find the company has never used a flexible budget, and you suggest preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you estimated the following cost formulas and gathered the following actual cost data for March: Cost Formula Actual Cost in March Utilities $16,700 + $0.17 per machine-hour $ 21,900 Maintenance $38, 400 +$1.70 per machine-hour $ 66,200 Supplies $0.50 per machine-hour $ 9,800 Indirect labor $94,400 +$1.80 per machine-hour $131,300 Depreciation $68,000 $ 69, 700 During March, the company worked 18,000 machine-hours and produced 12,000 units. The company originally planned to work 20,000 machine-hours during March. Required: Calculate…
You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president asked you to review the company's costing system and "do what you can to help us get better control of our manufacturing overhead costs." You find the company has never used a flexible budget, and you suggest preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you estimated the following cost formulas and gathered the following actual cost data for March Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $16,400 + $0.19 per machine-hour $38,100 +$1.60 per machine-hour $0.60 per machine-hour $94,400 +$1.60 per machine-hour $67,600 Actual Cost in March $ 21,810 $ 62,300 $ 11,200 $ 125,700 $ 69,300 During March, the company worked 17,000 machine-hours and produced 11,000 units. The company originally planned to work 19,000 machine-hours during March. Required: 1. Calculate…
You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president asked you to review the company's costing system and "do what you can to help us get better control of our manufacturing overhead costs." You find the company has never used a flexible budget, and you suggest preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you estimated the following cost formulas and gathered the following actual cost data for March: Actual Cost in March. $ 21,020 $ 64,300 $ 4,900 Utilities Maintenance. Supplies Indirect labor Depreciation $16,500 $38,200 Cost Formula $0.16 per machine-hour $1.90 per machine-hour $0.30 per machine-hour $94,400 $1.90 per machine-hour $68,400 $ 127,600 $ 70,100 During March, the company worked 15,000 machine-hours and produced 9,000 units. The company originally planned to work 17,000 machine-hours during March. Required: 1. Calculate the…
You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president asked you to review the company's costing system and "do what you can to help us get better control of our manufacturing overhead costs." You find the company has never used a flexible budget, and you suggest preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you estimated the following cost formulas and gathered the following actual cost data for March: Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $16,700+ $0.12 per machine-hour $38,800+ $1.20 per machine-hour $0.40 per machine-hour $94,300+ $1.20 per machine-hour $68,400 Required 1 During March, the company worked 20,000 machine-hours and produced 14,000 units. The company originally planned to work 22,000 machine-hours during March. Required: 1. Calculate the activity variances for March. 2. Calculate the…
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 $16,900 + $0.18 per machine-hour $ 22,300 Maintenance $38,400 + $1.30 per machine-hour $ 58,200 Supplies $0.60 per machine-hour $ 11,800 Indirect labor $94,300 + $1.30 per machine-hour $ 121,200 Depreciation $68,000 $ 69,700 During March, the company worked 18,000 machine-hours and produced 12,000 units. The company had originally planned to work 20,000…
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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: Actual Cost in March $ 22,840 Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $16,900 + $0.18 per machine-hour $39,000 + $1.20 per machine-hour $0.50 per machine-hour $94,200 + $1.60 per machine-hour $67,600 $ 60,400 $ 11,300 $ 131,900 $ 69,300 During March, the company worked 21,000 machine-hours and produced 15,000 units. The company had originally planned to work 23,000 machine-hours during March.…
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.…
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 $ 20,400 $ 68,700 $ 17,800 $ 127,700 $ 69,500 Utilities Maintenance Supplies Indirect labor Depreciation 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. Cost Formula $16,400+ $0.11 per machine-hour $38,900 + $1.80 per machine-hour $0.90 per machine-hour Required: 1. Prepare a flexible budget…