Requirement 1. What is the static budget number of setups for

2020?

Determine the formula, then compute the static budget number of setups.

				Static budget
			=	number of setups
			=

Part 2

Requirement 2. What is the flexible-budget number of setups for

2020?

Determine the formula, then compute the flexible-budget number of setups.

				Flexible budget
			=	number of setups
			=

Part 3

Requirement 3. What is the actual number of setups in

2020?

Determine the formula, then compute the actual number of setups.

				Actual
			=	number of setups
			=

Part 4

Requirement 4. Assuming fixed setup overhead costs are allocated using setup-hours, what is the predetermined fixed setup overhead allocation rate?

First, determine the formula and compute the static budget number of hours.

				Static budget
			=	number of hours
			=

Part 5

Now determine the formula and compute the predetermined fixed setup overhead allocation rate.

				Fixed overhead
			=	rate
			=

Part 6

Requirement 5. Does

TTS's

charge of

$133

cover the budgeted variable overhead cost of an order? The budgeted total cost? (Abbreviation: OH = Overhead.)

Begin by determining the formula and computing the budgeted variable overhead cost of an order.

				Budgeted variable OH
			=	cost of a setup
			=

Part 7

Next, determine the formula and compute the budgeted fixed overhead cost of an order.

				Budgeted fixed OH
			=	cost of a setup
			=

Part 8

The charge of

$133

covers

does not cover

equals

the budgeted incremental cost of a setup

and covers

, but does cover

, but does not cover

or

the budgeted full cost.

Part 9

Requirement 6. For direct variable setup costs, compute the price and efficiency variances.

Begin by calculating the following amounts for the variable overhead.

		Actual input
	Actual costs		Flexible
	incurred	budgeted rate	budget
Variable overhead

Part 10

Now compute the price and efficiency variances using the amounts you calculated above. (Label the variance as favorable (F) or unfavorable (U).)

	Price		Efficiency
	variance		variance
Variable OH

Part 11

Requirement 7. For fixed setup overhead costs, compute the spending and the production-volume variances.

		Same budgeted
		lump sum
	Actual costs	regardless of	Allocated
	incurred	output level	overhead
Fixed overhead

Part 12

Now compute the spending variance and production-volume variances using the amounts you calculated above. (Label the variance as favorable (F) or unfavorable (U).)

	Spending		Production-volume
	variance		variance
Fixed overhead

Part 13

Requirement 8. What qualitative factors should

TTS

consider before accepting or rejecting a special order?

A.Rejecting an order may have implications for future orders (i.e., groups would be reluctant to order tote bags from this supplier again).

TTSshould

consider factors such as prior history with the customer and potential future sales.

B.If the special order comes at heavy volume times,

TTS

should look at the opportunity cost of filling it, i.e., accepting the order may interfere with or delay the production of other bags.

C.If a bag is relatively new,

TTS

might consider running a full batch and holding the extra bags in case of a second special order or just hold the extra bags until next semester.

D.

All of the above.

The Torti Shop (TTS) specializes in making fraternity and sorority tote bags for the college market. TTS produces bags in batch sizes of 140. For rush orders, TTS will produce smaller batches for an additional charge of $133 per setup. Budgeted and actual costs for the production process for 2020 are as follows: Data table