Cost Formula Actual Cost in March Utilities $16,300 + $0.15 per machine-hour $ 20,800 Maintenance $38,200 + $1.40 per machine-hour $ 57,200 Supplies $0.60 per machine-hour $ 10,600 Indirect labor $94,000 + $1.80 per machine-hour $ 127,300 Depreciation $68,000 $ 69,700 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. Calculate the activity variances for March. 2. Calculate the spending variances for March.

1. Activity Variances= 10,500 F

2. Spending Variance 5,900 U

Explanation:

The spending variance is the difference between the actual costs and the flexed costs at that level of activity.

The activity variances are the difference between the costs of actual activity and the costs of planned activity. The planned machine hours were 18000

1. Activity Variances

Particulars                    Flexible              Actual          Activity

                                          at 18000            at 16000       Variances

Utilities                              19,000             20,800                 1,800 U

Maintenance                      63,400           57,200                 6,200 F

Supplies                             10,800             10,600                  200 F

Indirect Labor                    126,400         127,300                  900 U

Depreciation                     76,500             69,700                  6 ,800 F

Total                                                                                      10,500 F  

                                       2. Spending Variance  

    Particulars                    Flexible              Actual          Activity

                                          at 16000            at 16000       Variances

Utilities                              18,700             20,800                 2,100 U

Maintenance                      60,600           57,200                 3,400 F

Supplies                             9,600             10,600                  1000 U

Indirect Labor                    122,800         127,300             4,500 U

Depreciation                     68,000             69,700           1,700 U

Total                                                                                      5,900 U  

WORKING

Flexible Budgeted Costs for 18000 machine hours in March

Utilities $16,300 + $0.15 (18000) = $16,300 + $2700 =  $ 19,000

Maintenance $38,200 + $1.40(18000)= $ 38,200 + $25,200= $ 63,400

Supplies $0.60 (18000)= $ 10,800

Indirect labor $94,000 + $1.80 (18000)= $94,000 + $ 32,400= $ 126,400

Depreciation $68,000 $ 69,700

Budgeted Costs in March

Utilities $16,300 + $0.15 (16000) = $16,300 + $2400 =  $ 18,700

Maintenance $38,200 + $1.40(16000)= $ 38,200 + $22,400= $ 60,600

Supplies $0.60 (16000)= $ 9,600

Indirect labor $94,000 + $1.80 (16000)= $94,000 + $ 28,800= $ 122,800

Depreciation $68,000 $ 69,700

Actual Cost in March

Utilities $16,300 + $0.15 per machine-hour $ 20,800

Maintenance $38,200 + $1.40 per machine-hour $ 57,200

Supplies $0.60 per machine-hour $ 10,600

Indirect labor $94,000 + $1.80 per machine-hour $ 127,300

Depreciation $68,000 $ 69,700

Machine Hours in March 16,000

Units  produced 10,000 units.

Budgeted Machine Hours 18000

Budgeted Costs in March

Utilities $16,300 + $0.15 (18000) = $16,300 + $2700 =  $ 19,000

Maintenance $38,200 + $1.40(18000)= $ 38,200 + $25,200= $ 63,400

Supplies $0.60 (18000)= $ 10,800

Indirect labor $94,000 + $1.80 (18000)= $94,000 + $ 32,400= $ 126,400

Depreciation $68,000 $ 69,700

Required: 1. Calculate the activity variances for March. 2. Calculate the spending variances for March.

answer; test-retest;