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:

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.

Transcribed Image Text:

Units produced and sold Batch size (number of units per batch) Setup-hours per batch Variable overhead cost per setup-hour Total fixed setup overhead costs Actual Amounts 15,000 250 5 $40 $12,000 Static-budget Amounts 11,250 225 5.25 $38 $9,975 Units produced and sold Batch size (number of units per batch) Setup-hours per batch Variable overhead cost per setup-hour Total fixed setup overhead costs Actual Amounts 15,000 250 5 $40 $12,000 Static-budget Amounts 11,250 225 5.25 $38 $9,975

Answer rating: 100% (QA)

1 Efficiency Variance Standard HoursActual HoursStandard rate 15... View the full answer