Question

Utilities $16,400 plus $0.14 per machine-hour $ 20,440 Maintenance $39,000 plus $1.60 per machine-hour $ 58,400 Supplies $0.30 per machine-hour $ 4,600 Indirect labor $94,600 plus $1.10 per machine-hour $ 113,100 Depreciation $68,500 $ 70,200 During March, the company worked 14,000 machine-hours and produced 8,000 units. The company had originally planned to work 16,000 machine-hours during March.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.)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.)

Answer 1

Answer and Explanation:

a. The Preparation of activity variances for March is presented below:-

                          Activity variances for March

Particulars    Planning Budget       Flexible Budget  Activity Variances

Machine

hours                  16,000                       14,000

Utilities              $18,640                     $18,360             $280    F av.

For Planning budget

($16,400 + ($0.14 × 16,000))     ($16,400 + ($0.14 × 14,000))

Maintenance      $64,600                  $61,400              $3,200  Fav.

($39,000 + ($1.60 × 16,000))     ($39,000 + ($1.60 × 14,000))

Supplies               $4,800                   $4,200              $600   Fav.

                ($0.30 × 16,000)             ($0.30 × 14,000)

Indirect labor       $112,200                $110,000           $2,200 Fav.

($94,600 + ($1.10 × 16,000)      ($94,600 + ($1.10 × 14,000))

Depreciation          $68,500             $68,500              0

Total                       $284,740          $276,460        $8,280 Fav.

b. The Preparation of spending variances for March is presented below:-

                                Spending variances for March

Particulars            Flexible Budget         Actual          Difference

Machine

Hours                        $14,000                   $14,000

Utilities                      $18,360                  $20,440     $2,080 Unfav.

          ($16,400 + ($0.14 × 14,000))

Maintenance             $61,400                 $58,400      $3,000 Fav.

($39,000 + ($1.60 × 14,000))

Supplies                   $4,200                   $4,600         $400 U nfav.

                   ($0.30 × 14,000)

Indirect labor          $110,000                 $113,100         $3,100 Unfav.

($94,600 + ($1.10 × 14,000)

Depreciation           $68,500               $70,200            $1,700  Unfav.

Total                          $276,460            $280,740           $4,280 Unfav.

For reaching the total we added all the expenses in both spending variance and activity variance.