Alpha Capital Company provides financial services to their clients. Recently, Alpha has experienced rapid growth rate due
Question:
Alpha Capital Company provides financial services to their clients. Recently, Alpha has experienced rapid growth rate due to expansion and is becoming concerned as to their rising costs, particularly their technology overhead costs. Alpha had determined the cost driver of both their variable and fixed technology overhead costs to be the number of CPU units of their computer usage. Alpha’s measure of “production” is the number of client interactions.
The technology budget for Alpha for the first quarter of 2020 are as follows:
The actual results for the first quarter of 2020 are as follows:
Required
1. Calculate the variable overhead spending and efficiency variances and indicate whether each is Favorable (F) or unfavorable (U).
2. Calculate the fixed overhead spending and production volume variances and indicate whether each is favorable (F) or unfavorable (U).
3. Comment on Alpha Capital’s overhead variances. In your view, is the firm right to be worried about its control over technology spending?
Step by Step Answer:
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 9780135628478
17th Edition
Authors: Srikant M. Datar, Madhav V. Rajan