a special line of plastic toy racing cars in batches. To manufacture a batch of

Question

a special line of plastic toy racing cars in batches. To manufacture a batch of the cars Munoz Inc. must Munoz Inc. setup 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 car. Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number cf setup hours. The following information pertains to June 2012 Actual Static-budget Amounts nts 15,000 nits produced and sold atch size (number of units per batch) 11,250 225 5.25 250 hours per batch riable overhead cost per setup hour $40$38 $14,000 Total fixed setup overhead costs Calculate the ABC production-volume variance for fixed setup overhead costs $4,666.67 unfavourable $400 unfavourable $1,600 unfavourable $4,666.67 favourable

Explanation / Answer

Munoz Inc. Calculate the production-volume variance for fixed setup overhead costs. Normal setup hours = (11,250 / 225) × 5.25 = 262.5 hours OH rate = $14,000 / 262.5 = $53.33 per setup ho ur [(15,000 / 225) × 5.25 × $53.33] - $14,000 = $4,666.67 favorable Troy Company What is the net effect to the income statement for the sale of byproduct, if byproducts are recognized at the point of sale? 4,000 litres x $4 = $16,000

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