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Calculation of Value-Added and Non-Value-Added Costs, Activity Volume and Unused Capacity Variances Rico Company produces custom-made machine parts. Rico recently has implemented an activity-based management

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Calculation of Value-Added and Non-Value-Added Costs, Activity Volume and Unused Capacity Variances Rico Company produces custom-made machine parts. Rico recently has implemented an activity-based management (ABM) system with the objective of reducing costs. Rico has begun analyzing each activity to determine ways to increase its efficiency. Setting up equipment was among the first group of activities to be carefully studied. The study revealed that setup hours was a good driver for the activity. During the last year, the company incurred fixed setup costs of $523,260 (salanies of 17 . employees). The fixed costs provide a capacity of 29,070 hours (1,710 per employee at practical capacity). The setup activity was viewed as necessary, and the valueadded standard was set at 1,710 hours. Actual setup hours used in the most recent period were 27,590 . Required: 1. Calculate the volume and unused capacity variances for the setup activity. Enter all amounts as positive values. 2. Prepare a report that presents value-added, non-value-added, and actual costs for setup

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