Question :
5) Calculate the production-volume variance for fixed setup overhead costs.
A) : 1217266
5) Calculate the production-volume variance for fixed setup overhead costs.
A) $4,666.67 unfavorable
B) $400 unfavorable
C) $4,666.67 favorable
D) $400 favorable
Answer the following questions using the information below:
Lukehart Industries, Inc., produces air purifiers. Lukehart, Inc., produces the air purifiers in batches. To manufacture a batch of the purifiers, Lukehart, Inc., must set up the machines and assembly line tooling. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and tooling for different models of the air purifiers.
Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours. The following information pertains to June 2011:
BudgetActual
AmountsAmounts
Units produced and sold10,0009,000
Batch size (number of units per batch)400375
Setup-hours per batch65.5
Variable overhead cost per setup-hour$50$52
Total fixed setup overhead costs$18,000$17,750
6) Calculate the efficiency variance for variable setup overhead costs.
A) $150 favorable
B) $114 favorable
C) $264 unfavorable
D) $264 favorable
7) Calculate the spending variance for variable setup overhead costs.
A) $150 unfavorable
B) $150 favorable
C) $264 unfavorable
D) $264 favorable
8) Calculate the flexible-budget variance for variable setup overhead costs.
A) $114 favorable
B) $264 favorable
C) $264 unfavorable
D) $114 unfavorable
9) Calculate the spending variance for fixed setup overhead costs.
A) $250 unfavorable
B) $150 unfavorable
C) $250 favorable
D) $150 favorable
10) Calculate the production-volume variance for fixed setup overhead costs.
A) $1,800 favorable
B) $1,800 unfavorable
C) $250 unfavorable
D) $250 favorable
11) Fixed and variable cost variances can ________ be applied to activity-based costing systems.
A) always
B) most times
C) seldom
D) never
12) Variance analysis of fixed overhead costs is also useful when a company uses activity-based costing.
13) A favorable fixed setup overhead spending variance could be due to higher lease costs of new setup equipment.
14) An unfavorable variable setup overhead efficiency variance could be due to actual setup-hours exceeding the setup-hours planned for the units produced.
15) Casey Corporation produces a special line of basketball hoops. Casey Corporation produces the hoops in batches. To manufacture a batch of the basketball hoops, Casey Corporation must set up the machines and molds. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and molds for different styles of basketball hoops.
Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours. The following information pertains to January 2005.
Static-budgetActual
AmountsAmounts
Basketball hoops produced and sold30,00028,000
Batch size (number of units per batch)200250
Setup-hours per batch54
Variable overhead cost per setup hour$10$9
Total fixed setup overhead costs$22,500$21,000
Required:
a.Calculate the efficiency variance for variable setup overhead costs.
b.Calculate the spending variance for variable setup overhead costs.
c.Calculate the flexible-budget variance for variable setup overhead costs.
d.Calculate the spending variance for fixed setup overhead costs.
e.Calculate the production-volume variance for fixed setup overhead costs.
Answer:
a.((28,000 / 250) × 4 × $10) – (28,000 / 200) × 5 × $10) = $2,520 (F)
b.(28,000 / 250) × 4 × ($9 – $10) = $448 (F)
c.$2,520 (F) + $448 (F) = $2,968 (F)
d.$22,500 – $21,000 = $1,500 (F)
e.Normal setup-hours = (30,000 / 200) × 5 = 750 hours
OH rate = $22,500 / 750 = $30 per setup-hour
$22,500 – ((28,000 / 200) × 5 × $30) = $1,500 (U)
