Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 2

Flexible Budget and Variances for Depreciation Clark Company's master budget includes $360,000 for equipment depreciation. The master budget was prepared for an annual volume of 120,000 chargeable hours. This volume is expected to occur uniformly throughout the year. During September, Clark performed 9,000 chargeable hours, and the firm recorded $28,000 of depreciation expense.
Required
1. Determine the flexible-budget amount for equipment depreciation in September.
2. Compute the spending variance for the depreciation expense on equipment.
3. Calculate the fixed overhead production volume variance for the depreciation expense. What is the interpretation of this variance
4. List possible reasons for the spending variance.