Cornerstone Exercise 12.5 (Algorithmic) Activity Capacity Management

Uchdorf Manufacturing just completed a study of its purchasing activity with the objective of improving its efficiency. The driver for the activity is number of purchase orders. The following data pertain to the activity for the most recent year:

Activity supply: ten purchasing agents capable of processing 2,100 orders per year (21,000 orders)

Purchasing agent cost (salary): $42,800 per year Actual usage: 19,900 orders per year Value-added quantity: 11,500 orders per year

Required:

1. Calculate the volume variance. Round your final answer to the nearest dollar. $

2. Calculate the unused capacity variance. Round your final answer to the nearest dollar. $

3. What if the actual usage drops to 16,000 orders? What effect will this have on capacity management? Round your final answer to the nearest dollar. $