Question
Matterhorn, Inc., produces a special line of toy racing cars. Matterhorn produces the cars in batches. To manufacture each batch of the cars, Matterhorn must
Matterhorn, Inc., produces a special line of toy racing cars. Matterhorn produces the
cars in batches. To manufacture each batch of the cars, Matterhorn must set up the
machines and molds. Setup costs are batch-level costs and are fixed with respect to
the number of setup-hours. A separate Setup Department is responsible for setting up
machines and molds for each style of car. The following information pertains to July
2017:
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
Total fixed setup overhead costs $12,000 $9,975
Calculate the following:
a. the spending variance for fixed setup overhead costs;
b. the budgeted fixed setup overhead rate; and
c. the production-volume variance for fixed overhead setup costs.
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