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Calaulation of Value-Added and Non-Value Added Costs, Activity Volume and Unused Capacity Varlances Maquina Company produces custom-made machine parts. Maquina recently has implemented an activity-based
Calaulation of Value-Added and Non-Value Added Costs, Activity Volume and Unused Capacity Varlances Maquina Company produces custom-made machine parts. Maquina recently has implemented an activity-based management (ABM) system with the objective of reducing costs. Maquina has begun analyzing each activity to determine ways to increase its effidency, Setting up equipment was among the first group of activitles to be carefully studled. The study revealed that setup hours was a good driver for the activity, During the last year, the company incurred fixed setup costs of $584,640 (salaries of 16 employees). The fixed costs provide a capacity of 32,480 hours (2,030 per employee at practical capacity). The setup activity was viewed as necessary, and the value-added standard was set at 2,030 hours. Actual setup hours used in the most recent perlod were 30,700. Required: 1. Calculate the volume and unused capacity variances for the setup activity. Enter all amounts as positive values Volume Variance 547444 Unused Capacity Variance Hide Feedback Partially Correct My Work 1. Activity volume variance = (AQ-SQ) x SP, unused Capacity variance = (AU-AQ)s SP. Hide 2. Prepare a report that presents value-added, non-value-added, and actual costs for setup. Maquina Company Value-and Non-Value-Added Cost Report Value-Added Non-Value-Added Actual Setting up Hide Feedback Incorrect 2. Value-added costs-SQ (Standard Quantity) x SP (Standard Price). Non-value-added costs-(AQ (Actual Quantity) SQ) x SP
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