PROBLEM 9-18)Activity and Spending Variances LO9-1, LO9-2, LO9-3 IK 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 Cost Formula in March Utilities .. . $20,600 + $0.10 per machine-hour $24,200 Maintenance ....... $40,000 + $1.60 per machine-hour $78,100 Supplies . $0.30 per machine-hour $8,400 Indirect labor . . ..... $130,000 + $0.70 per machine-hour $149,600 Depreciation ..... $70,000 $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. (Hint: Refer to Exhibit 9-6.) Explain what these variances mean. 2. Calculate the spending variances for March. (Hint: Refer to Exhibit 9-7.) Explain what these variances mean.CASE 9726 Performance Report with More Than One Cost Driver LO9-2, LO9-3, LO9-5, LO9-6 IK The Little Theatre is a nonprofit organization that stages plays for children. The theater has a very small full-time professional administrative staff. Through a special arrangement with the actors' union, actors and directors rehearse without pay and are paid only for actual performances. The Little Theatre planned to put on six different productions with a total of 108 performances. For example, one of the productions was Peter Rabbit, which had a six-week run with three perfor- mances on each weekend. The costs from the current year's planning budget appear below: The Little Theatre Costs from the Planning Budget For the Year Ended December 31 Budgeted number of productions ..... 6 Budgeted number of performances 108 Actors and directors wages .. .. $216,000 Stagehands wages.... 32,400 Ticket booth personnel and ushers wages 16,200 Scenery, costumes, and props ....... 108,000 Theater hall rent . .. ... 54,000 Printed programs .... 27,000 Publicity......... 12,000 Administrative expenses . .... 43,200 Total ..... $508,800Some of the costs vary with the number of productions, some vary with the number of per- formances, and some are fixed. The costs of scenery, costumes, props, and publicity vary with the number of productions. It doesn't make any difference how many times Peter Rabbit is performed, the cost of the scenery is the same. Likewise, the cost of publicizing a play with posters and radio commercials is the same whether there are 10, 20, or 30 performances. On the other hand, the wages of the actors, directors, stagehands, ticket booth personnel, and ushers vary with the number of performances. Similarly, the costs of renting the hall and printing the programs vary with the number of performances. For administrative expenses, 75 percent of the budgeted costs are fixed, 15 percent depend on the number of productions staged, and the remaining 10 percent depend on the number of performances. After the beginning of the year, the theater's board of directors authorized expanding the the- ater's program to seven productions and a total of 168 performances. Not surprisingly, actual costs were considerably higher than the planning budget. (Grants from donors and ticket sales were also correspondingly higher but are not shown here.) Data concerning the actual costs were as follows: The Little Theatre Actual Costs For the Year Ended December 31 Actual number of productions . .... . . . . .. . ... 7 Actual number of performances......... 168 Actors and directors wages . $341,800 Stagehands wages 49,700 Ticket booth personnel and ushers wages 25,900 Scenery, costumes, and props 130,600 Theater hall rent .. . 78,000 Printed programs 38,300 Publicity . ... ... 15,100 Administrative expenses 47,500 Total $726,900 Required: 1. Using Exhibit 9-11 as your guide, prepare a flexible budget performance report for the year. 2. If you were on the board of directors, would you be pleased with how well costs were con- trolled during the year? Why, or why not? 3. The cost formulas provide figures for the average cost per production and average cost per performance. How accurate do you think these figures would be for predicting the cost of a new production or an additional performance of an existing production