you have just been hired by fab corporation

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	  $20,600 plus $0.10 per machine-hour	$	24,200    
  Maintenance	  $40,000 plus $1.60 per machine-hour	$	78,100    
  Supplies	  $0.30 per machine-hour	$	8,400    
  Indirect labor	  $130,000 plus $0.70 per machine-hour	$	149,600    
  Depreciation	  $70,000	$	71,500    
 
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During March, the company worked 26,000 machine-hours and produced 15,000 units. The company had originally planned to work 30,000 machine-hours during March.
 
Required:
1.	
Complete the report showing the activity variances for March. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
 	 
      
 
2.	
Complete the report showing the spending variances for March. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
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Explanation:
1.
The activity variances are shown below:

 
FAB Corporation
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Activity Variances
For the Month Ended March 31
 	Flexible Budget	Planning Budget	Activity
Variances
  Machine-hours (q)	 	26,000  	 	30,000  	 	  	 
    	
 	 	 
  Utilities ($20,600 + $0.10q)	$	23,200  	$	23,600  	$	400  	F
  Maintenance ($40,000 + $1.60q)	 	81,600  	 	88,000  	 	6,400  	F
  Supplies ($0.30q)	 	7,800  	 	9,000  	 	1,200  	F
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  Indirect labor ($130,000 + $0.70q)	 	148,200  	 	151,000  	 	2,800  	F
  Depreciation ($70,000)	 	70,000  	 	70,000  	 	0  	None
    	
 
  Total	$	330,800  	$	341,600  	$	10,800  	F
 	
 

 
2.
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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)	 	26,000  	 	26,000  	 	  	 
    	
 	 	 
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  Utilities ($20,600 + $0.10q)	$	24,200  	$	23,200  	$	1,000  	U
  Maintenance ($40,000 + $1.60q)	 	78,100  	 	81,600  	 	3,500  	F
  Supplies ($0.30q)	 	8,400  	 	7,800  	 	600  	U
  Indirect labor ($130,000 + $0.70q)	 	149,600  	 	148,200  	 	1,400  	U
  Depreciation ($70,000)	 	71,500  	 	70,000  	 	1,500  	U
   	
 
  Total	$	331,800  	$	330,800  	$	1,000  	U
you have just been hired by fab corporation