9) Villanova, Inc., has done a cost analysis for its production of rubber stamps

Question

9)

Villanova, Inc., has done a cost analysis for its production of rubber stamps. The following activities and cost drivers have been developed:

Activity Cost Formula

Design $5,000 + $0.05 per machine hour

Machining $25,000 + $0.01 per machine hour

Setups $35 per batch

Purchasing $50 + $15 per purchase order

Following are the actual costs of producing 35,000 rubber stamps: 1,000 machine hours; 5 batches; 30 purchase orders

Design

$5,080

Machining

?

Setups

?

Purchasing

$600

The following variances were given in the activity performance report:

Design

?

Machining

$40 F

Setups

$15 F

Purchasing

?

What is the activity variance for purchasing?

(0.5pts)

$500 U

$100 U

$50 U

none of these

Explanation / Answer

Ans. The Activity Variance for Purchasing = $100 U

Actual Purchasing = $600

Less:- Budgeted Purchasing = $50 +( $15 per Purchase order x 30 purchases order ) =$500

Activity Variance = $100 U

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