Casey Corporation produces a special line of basketball hoops. Casey Corporation produces the hoops in batches. To manufacture a batch of the basketball hoops, Casey Corporation must set up the machines and molds. 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 and molds for different styles of basketball hoops.  

  

 

 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 January 2005. 

 

  

 

 Static-budget Actual 

 

 Amounts Amounts 

 

 Basketball hoops produced and sold30,00028,000 

 

 Batch size (number of units per batch)200250 

 

 Setup-hours per batch54 

 

 Variable overhead cost per setup hour$10$9 

 

 Total fixed setup overhead costs$22,500$21,000 

 

  

 

 Required:  

 

 a.Calculate the efficiency variance for variable overhead setup costs. 

 

 b.Calculate the spending variance for variable overhead setup costs. 

 

 c.Calculate the flexible-budget variance for variable overhead setup costs. 

 

 d.Calculate the spending variance for fixed overhead setup costs. 

 

 e.Calculate the production-volume variance for fixed overhead setup costs. 

 

  

 

 16) Teecorp Company uses a flexible budget for its indirect manufacturing costs. For 2015, the company anticipated that it would produce 27,000 units with 4,800 machine-hours and 8,000 employee days. The costs and cost drivers were to be as follows: 

 

  

 

 Fixed Variable Cost driver 

 

 Product handling$45,000$0.75per unit 

 

 Inspection12,00012.00per 100 unit batch 

 

 Utilities6006.00per 100 unit batch 

 

 Maintenance1,2500.25per machine-hour 

 

 Supplies5.00per employee day 

 

  

 

 During the year, the company processed 26,500 units, worked 8,200 employee days, and had 4,850 machine-hours. The actual costs for 2015 were: 

 

  

 

 Actual costs 

 

 Product handling$65,000 

 

 Inspection16,200 

 

 Utilities2,220 

 

 Maintenance2,850 

 

 Supplies39,900 

 

  

 

 Required: 

 

 a.Prepare the static budget using the overhead items above and then compute the static-budget variances. 

 

 b.Prepare the flexible budget using the overhead items above and then compute the flexible-budget variances.