Munoz, Inc., produces a special line of plastic toy racing cars. Munoz, Inc., produces the cars in batches. To manufacture a batch of the cars, Munoz, Inc., 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 car.

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 June 2015:

	Actual Amounts	Static-budget Amounts
Units produced and sold	14 comma 80014,800	11 comma 80011,800
Batch size (number of units per batch)	285285	245245
Setup-hours per batch	44	5.255.25
Variable overhead cost per setup-hour	$ 43$43	$ 40$40
Total fixed setup overhead costs	$ 14 comma 695$14,695	$ 12 comma 645$12,645

Calculate the efficiency variance for variable overhead setup costs.

A.

$ 623$623

favorable

B.

$ 4 comma 377$4,377

favorable

C.

$ 4 comma 377$4,377

unfavorable

D.

$ 623$623

unfavorable

Click to select your answer.

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