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 $38,500+ $2.10 per machine-hour $0.90 per machine-hour $94,500+ $1.50 per machine-hour $67,900 Actual Cost in March $ 20,660 $ 70,100 $ 16,000 $ 122,400 $ 69,600 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. Calculate the activity variances for March. 2. Calculate the spending variances for March.

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 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 t…