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: Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $17,000 + $0.12 per machine-hour $38,300 + $1.80 per machine-hour $0.80 per machine-hour $94,400 + $1.40 per machine-hour $68,200 Actual Cost in March $ 20,960 $ 64,500 $ 14,200 $120,500 $ 69,900 During March, the company worked 16,000 machine-hours and produced 10,000 units. The company had originally planned to work 18,000 machine-hours during March. Required: 1. Prepare a flexible budget for March. 2. Prepare a report showing the spending variances for March. "Wonderful! Not only did our salespeople do a good job in meeting the sales budget this year, but our production people did a good job in controlling costs as well," said Kim Clark, president of Martell Company. "Our $49,350 overall manufacturing cost variance is only 1.0% of the $4,935,000 standard cost of products made during the year. That's well within the 3% parameter set by management for acceptable variances. It looks like everyone will be in line for a bonus this year." The company produces and sells a single product. The standard cost card for the product follows: (2) Inputs Direct materials Direct labor Variable overhead Fixed overhead Total standard cost per unit (1) Standard Quantity or Hours 4.50 feet 1.8 hours 1.8 hours 1.8 hours $ $ $ $ Price or Rate 4.10 per foot 13 per hour 1.80 per hour 6.50 per hour Standard Cost (1) X (2) $ 18.45 23.40 3.24 11.70 $ 56.79 The following additional information is available for the year just completed: a. The company manufactured 15,000 units of product during the year. b. A total of 65,500 feet of material was purchased during the year at a cost of $4.40 per foot. All of this material was used to manufacture the 15,000 units produced. There were no beginning or ending inventories for the year. c. The company worked 30,000 direct labor-hours during the year at a direct labor cost of $12.65 per hour. d. Overhead is applied to products on the basis of standard direct labor-hours. Data relating to manufacturing overhead costs follow: 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: Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $17,000 + $0.12 per machine-hour $38,300 + $1.80 per machine-hour $0.80 per machine-hour $94,400 + $1.40 per machine-hour $68,200 Actual Cost in March $ 20,960 $ 64,500 $ 14,200 $120,500 $ 69,900 During March, the company worked 16,000 machine-hours and produced 10,000 units. The company had originally planned to work 18,000 machine-hours during March. Required: 1. Prepare a flexible budget for March. 2. Prepare a report showing the spending variances for March. "Wonderful! Not only did our salespeople do a good job in meeting the sales budget this year, but our production people did a good job in controlling costs as well," said Kim Clark, president of Martell Company. "Our $49,350 overall manufacturing cost variance is only 1.0% of the $4,935,000 standard cost of products made during the year. That's well within the 3% parameter set by management for acceptable variances. It looks like everyone will be in line for a bonus this year." The company produces and sells a single product. The standard cost card for the product follows: (2) Inputs Direct materials Direct labor Variable overhead Fixed overhead Total standard cost per unit (1) Standard Quantity or Hours 4.50 feet 1.8 hours 1.8 hours 1.8 hours $ $ $ $ Price or Rate 4.10 per foot 13 per hour 1.80 per hour 6.50 per hour Standard Cost (1) X (2) $ 18.45 23.40 3.24 11.70 $ 56.79 The following additional information is available for the year just completed: a. The company manufactured 15,000 units of product during the year. b. A total of 65,500 feet of material was purchased during the year at a cost of $4.40 per foot. All of this material was used to manufacture the 15,000 units produced. There were no beginning or ending inventories for the year. c. The company worked 30,000 direct labor-hours during the year at a direct labor cost of $12.65 per hour. d. Overhead is applied to products on the basis of standard direct labor-hours. Data relating to manufacturing overhead costs follow