You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device.

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	$16,000 plus $0.13 per machine-hour	$	20,920
Maintenance	$38,800 plus $1.20 per machine-hour	$	61,400
Supplies	$0.90 per machine-hour	$	21,400
Indirect labor	$94,100 plus $1.50 per machine-hour	$	131,000
Depreciation	$67,600	$	69,300

During March, the company worked 22,000 machine-hours and produced 16,000 units. The company had originally planned to work 24,000 machine-hours during March.

Required:

1.	Complete the report showing the activity variances for March.

2. Complete the report showing the spending variances for March.   Explanation: 1. The activity variances are shown below: FAB Corporation Activity Variances For the Month Ended March 31   Flexible Budget Planning Budget Activity Variances   Machine-hours (q)   22,000     24,000                       Utilities ($16,000 + $0.13q) $ 18,860   $ 19,120   $ 260   F   Maintenance ($38,800 + $1.20q)   65,200     67,600     2,400   F   Supplies ($0.90q)   19,800     21,600     1,800   F   Indirect labor ($94,100 + $1.50q)   127,100     130,100     3,000   F   Depreciation ($67,600)   67,600     67,600     0   None          Total $ 298,560   $ 306,020   $ 7,460   F     2. The spending variances are computed below: FAB Corporation Spending Variances For the Month Ended March 31   Actual Results Flexible Budget Spending Variances   Machine-hours (q)   22,000     22,000                       Utilities ($16,000 + $0.13q) $ 20,920   $ 18,860   $ 2,060   U   Maintenance ($38,800 + $1.20q)   61,400     65,200     3,800   F   Supplies ($0.90q)   21,400     19,800     1,600   U   Indirect labor ($94,100 + $1.50q)   131,000     127,100     3,900   U   Depreciation ($67,600)   69,300     67,600     1,700   U         Total $ 304,020   $ 298,560   $ 5,460   U