Munoz, Inc. produces a special line of plastic toy racing cars. Munoz, Inc. prod
ID: 2484439 • Letter: M
Question
Munoz, Inc. produces a special line of plastic toy racing cars. Munoz, Inc. produces the cars in batches. To manufacture a batch of the cars, the company 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 car.
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 2016:
Actual Static-budget
Amounts Amounts
Units produced and sold 15,000 11,250
Batch size (number of units per batch) 250 225
Setup-hours per batch 5 5.25
Variable overhead cost per setup-hour $40 $38
Total fixed setup overhead costs $12,000 $9,975
Required:
1) Calculate the efficiency variance for variable overhead setup costs.
2) Calculate the rate variance for variable overhead setup costs.
3) Calculate the flexible-budget spending variance for variable overhead setup costs.
4) Calculate the spending variance for fixed setup overhead costs.
what formular did you use, please i want to be able to follow ty.
Explanation / Answer
1 Efficiency Variance (Standard Hours-Actual Hours)*Standard rate (15000/225*5.25- 15000/250*5)*38 = 1900 F 2 Rate variance (Standard rate- Actual rate)* Actual Hour (38-40)*(15000/250*5) = 600 UF 3 Flexible Budget variance (Standard Cost-Actual Cost) (15000/225*5.25*38- 15000/250*5*40) = 1300 F 4 Spending varaice (Standard Cost - Actual Cost) (9975-12000) = 2025 UF
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