Question
6) Activex Corporation produces a special line of hockey sticks in batches. To manufacture a batch of sticks Activex Corp. must setup the machines. Setup
6) Activex Corporation produces a special line of hockey sticks in batches. To manufacture a batch of sticks Activex Corp. must setup the machines. 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 for different type of sticks.
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 October 2020:
| Actual Amounts | Static-budget Amounts |
Units produced and sold | 15,000 | 11,250 |
Batch size (number of units per batch) | 250 | 225 |
Setup hours per batch | 5 | 5.25 |
Variable overhead cost per setup hour | $45 | $40 |
Total fixed setup overhead costs | $14,400 | $14,000 |
Calculate the rate and efficiency variances for variable setup overhead costs. (4)
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