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 $16,900 plus $0.20 per machine-hour $ 22,300
Maintenance $38,900 plus $1.90 per machine-hour $ 66,900
Supplies $0.70 per machine-hour $ 12,400
Indirect labor $94,600 plus $2.10 per machine-hour $ 133,300
Depreciation $68,400 $ 70,100

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.

1. Prepare a flexible budget for March.

Utilities

Maintenance

Supplies

Indirect labor

Depreciation

Total

2. Prepare a report showing the spending variances for March.

Utilities

Maintenance

Supplies

Indirect labor

Depreciation

Total