PROBLEM D: Flexible Budgets and Variances: 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 companys 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

Utilities $16,600 + $0.16 per machine-hour

Maintenance $38,600 + $1.30 per machine-hour

Supplies $0.90 per machine-hour

Indirect labor $94,700 + $1.40 per machine-hour

Depreciation $67,800

Cost in March

$21,120

$54,500

$15,100

$119,400

$69,500

During March, the company worked 15,000 machine-hours and produced 9,000 units. The company had originally planned to work 17,000 machine-hours during March. Required: 1. Without calculating any numbers, will the volume (activity) variances for these expenses be favorable or unfavorable? Justify your answer (1 short sentence is all you need). Response: 2. Calculate the spending variances for March.

Spending variance amount Favorable SHOW YOUR CALCULATIONS !!

Utilities $

Maintenance $

Supplies $

Indirect labor $

Depreciation $