Clark Company’s master budget includes $360,000 for equipment depreciation. The master budget was prepared for an annual volume of 120,000 chargeable hours. This volume is expected to occur uniformly throughout the year. During September, Clark performed 9,000 chargeable hours and recorded $28,000 of depreciation.

Required

1. Determine the flexible budget amount (to nearest whole dollar) for equipment depreciation in September.

2. Compute the spending variance for the depreciation on equipment, rounded to nearest whole dollar. Was the variance favorable (F) or unfavorable (U)?

3. Calculate the fixed overhead production volume variance for depreciation expense in September, rounded to nearest whole dollar. Was this variance favorable (F) or unfavorable (U)? What is the interpretation of this variance?

4. List possible reasons for the observed spending variance.