Question 3 Magic Corporation (MC) produces special carbon fibre basketball hoops. These hoops are produced in batches, where machines and moulds have to be set up for every batch 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 moulds 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 March 2016 Static-budget Amounts Actual Amounts Basketball hoops produced and sold Batch size (number of units per batch) Setup-hours per batch Variable overhead cost per setup hour Total fixed setup overhead costs 60,000 400 10 $20 $45,000 56,000 500 $18 $42,000 Required: (a)Calculate the efficiency variance for variable setup overhead costs (4 marks) (b)Calculate the spending variance for variable setup overhead costs (4 marks) (c) Explain why the spending variance for variable setup overhead costs is the appropriate variance for evaluating the manager in charge of the Setup (2 marks) (d) Calculate the flexible-budget variance for variable setup overhead costs. Write a 6 marks (e)Calculate the spending variance for fixed setup overhead costs. Explain how this (3 marks) Department. journal entry to record the variable setup overhead cost for March 2016 variance can be useful to MC for controlling production costs (f)Calculate the production-volume variance for fixed setup overhead costs