Jump Industries has decided to commence producing gym balls due to increased demand from households for...
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Jump Industries has decided to commence producing gym balls due to increased demand from households for exercise equipment. The gym balls are prepared in batches. To prepare a batch for production, Jump Industries must set up the machinery. The setup department is responsible for setting up machines for the different sizes of gym balls to be produced. The overhead costs associated with the setup consist of some costs that are variable and some costs that are fixed with respect to the number of setup hours. The company has provided the following data: Gym balls 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 Gym balls 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 Static budget amounts 75,000 500 7 $25 $55,000 Actual amounts 77,000 600 8 $28 $58,000 Required: a) Calculate the efficiency variance for variance overhead setup costs (6 marks) b) Calculate the spending variance for variable overhead setup costs (6 marks) c) Calculate the flexible-budget variance for variable overhead setup costs (6 marks) d) Calculate the spending variance for fixed overhead setup costs (6 marks) e) Calculate the production-volume variance for fixed overhead setup costs (6 marks) f) Comment on the overhead variances calculated (10 marks) Jump Industries has decided to commence producing gym balls due to increased demand from households for exercise equipment. The gym balls are prepared in batches. To prepare a batch for production, Jump Industries must set up the machinery. The setup department is responsible for setting up machines for the different sizes of gym balls to be produced. The overhead costs associated with the setup consist of some costs that are variable and some costs that are fixed with respect to the number of setup hours. The company has provided the following data: Gym balls 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 Gym balls 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 Static budget amounts 75,000 500 7 $25 $55,000 Actual amounts 77,000 600 8 $28 $58,000 Required: a) Calculate the efficiency variance for variance overhead setup costs (6 marks) b) Calculate the spending variance for variable overhead setup costs (6 marks) c) Calculate the flexible-budget variance for variable overhead setup costs (6 marks) d) Calculate the spending variance for fixed overhead setup costs (6 marks) e) Calculate the production-volume variance for fixed overhead setup costs (6 marks) f) Comment on the overhead variances calculated (10 marks)
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a Efficiency variance for variable overhead setup costs Standard hours allowed Gym balls produced and sold Setuphours per batch 77000 8 616000 hours E... View the full answer
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