Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Problem 9-18 (Algo) Activity and Spending Variances [LO9-1, LO9-2, LO9-3]
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
$ 22,100
$ 82,100
$ 22,300
$ 123,000
$ 70,100
Utilities
Maintenance
$16,300 + $0.16 per machine-hour
$38,300+ $2.00 per machine-hour
$0.90 per machine-hour
Supplies
Indirect labor $94,600+ $1.10 per machine-hour
Depreciation $68,400
During March, the company worked 23,000 machine-hours and produced 17,000 units. The company originally planned to work
25,000 machine-hours during March.
Required:
• Calculate the activity variances for March.
• Calculate the spending variances for March.
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Transcribed Image Text:Problem 9-18 (Algo) Activity and Spending Variances [LO9-1, LO9-2, LO9-3] 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 $ 22,100 $ 82,100 $ 22,300 $ 123,000 $ 70,100 Utilities Maintenance $16,300 + $0.16 per machine-hour $38,300+ $2.00 per machine-hour $0.90 per machine-hour Supplies Indirect labor $94,600+ $1.10 per machine-hour Depreciation $68,400 During March, the company worked 23,000 machine-hours and produced 17,000 units. The company originally planned to work 25,000 machine-hours during March. Required: • Calculate the activity variances for March. • Calculate the spending variances for March.
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