=+12-38 KK Activity-based costing, batch-level variance analysis OBJECTIVES 2, 3, 4 Jo Nathan Publishing Company specialises in printing specialty textbooks for a small but profitable university market. Due to the high set-up costs for each batch printed, Jo Nathan Publishing holds the book requests until demand for a book is approximately 500.

At that point, Jo Nathan Publishing will schedule the set-up and production of the book. For rush orders, Jo Nathan Publishing will produce smaller batches for an additional charge of $400 per set-up.

Budgeted and actual costs for the printing process for 2016 were:

Static-budget amounts Actual results Number of books produced 300 000 324 000 Average number of books per set-up 500 480 Hours to set up printers 8 hours 8.2 hours Direct variable cost per set-up hour $40 $39 Total fixed set-up overhead costs $105 600 $119 000 Required 1 What is the static budget number of set-ups for 2016?

2 What is the flexible budget number of set-ups for 2016?

3 What is the actual number of set-ups in 2016?

4 Assuming fixed set-up overhead costs are allocated using set-up hours, what is the predetermined fixed set-up overhead allocation rate?

5 Does Jo Nathan Publishing’s charge of $400 cover the budgeted variable overhead cost of an order? The budgeted total overhead cost?

6 For variable set-up overhead costs, calculate the spending and efficiency variances.

7 For fixed set-up overhead costs, calculate the spending and the production-volume variances.

8 What qualitative factors should Jo Nathan Publishing consider before accepting or rejecting a special order?