Winton Corporation produces a special line of basketball hoops. Winton Corporation produces the hoops in batches. To manufacture a batch of the basketball hoops, Winton 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 2014.

Static-budge Amounts Actual Amounts

Basketball hoops produced and sold 40,000 38,000

Batch size (number of units per batch) 200 250

Setup-hours per batch 5 4

Variable overhead cost per setup-hour $10 $9

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

Required:

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

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

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

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

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

6. Can the variable overhead efficiency variance

1- be COMPUTED the same way as the efficiency variance for direct-cost items? Yes or No?

2- be INTERPRETED the same way as the efficiency variance for direct-cost items? Explain.