Question

Roadway Corporation produces a special line of plastic toy racing cars. Roadway Corporation , produces the cars in batches. To manufacture a batch of the cars, Roadway 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 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 Static-budget Amounts Amounts Units produced and sold 15,700 11,950 Batch size (number of units per batch) 325 265 Setup-hours per batch 3 4.25 Variable overhead cost per setup-hour $48 $45 Total fixed setup overhead costs $11,310 $9,010 Calculate the efficiency variance for variable overhead setup costs. (Round all intermediary calculations two decimal places and your final answer to the nearest whole number.) Group of answer choices $435 Favorable $4,810 Favorable $4,810 Unfavorable $435 Unfavorable

Answer 1

the efficiency variance for variable overhead setup costs is $4,810 favorable

Step-by-step explanation:

The computation of the efficiency variance for variable overhead setup costs is shown below;

= ((15,700 ÷ 265) × 4.25) × $45 - ((15,700 ÷ 325) × 3) × $45

= $11,330.6604 - $6,521.5384

= $4,809.12 favorable

= $4,810 favorable

hence, the efficiency variance for variable overhead setup costs is $4,810 favorable