Homework - Problem #2 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 determine the following cost formulas and gathered the following actual cost data for March: Cost Formula Actual Cost in March Utilities $20,600 + $0.10 per machine-hour $24,200 Maintenance $40,000+ $1.60 per machine-hour $78,100 Supplies $0.30 per machine-hour $8,400 Indirect labor $130,000+ $0.70 per machine-hour $149,600 Depreciation $70,000 $71,500 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: On the next page: 1. Calculate the activity variance and spending variances for March. 2. Explain what the activity variances mean. 3. Explain what the spending variances mean. 15 Planning Budget #1 - Prepare the flexible budget Actual Results Flexible Budger 2. What does the activity variance mean? 3. What does the spending variance mean