(Variances and conversion cost category) Billick Brake manufactures brake rotors. Until recently, the company applied overhead to production using di¬ rect labor hours. However, company facilities were recently automated, and the accounting system was revised to show only two cost categories, direct material and conversion. Estimated variable and fixed conversion costs for the current month were $170,000 and $76,000, respectively. Expected output for the current month was 5,000 rotors and the estimated number of ma¬ chine hours was 10,000. During the month, the firm actually used 9,000 ma¬ chine hours to make 4,800 rotors while incurring $228,000 of conversion costs. Of this amount, $150,000 was variable cost.

a. Using the four-variance approach, compute the variances for conversion costs.

b. Evaluate the effectiveness of the firm in controlling the current month’s costs.

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