Question

Raposa, Inc., produces a special line of plastic toy racing cars.​ Raposa, Inc., produces the cars in batches. To manufacture a batch of the​ cars, Raposa,​ Inc., must set up the machines and molds. Setup costs are

batchminus−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

setupminus−hours.

The following information pertains to June​ 2015:

	Actual	Static−budget
	Amounts	Amounts
Units produced and sold	14,800	11,800
Batch size​ (number of units per​ batch)	255	230
Setup−hours per batch	77	88
Variable overhead cost per setup−hour	$48.00	$42.00
Total fixed setup overhead costs	$21,339	$19,289

Calculate the spending variance for variable overhead setup costs.​ (Round all intermediary calculations two decimal places and your final answer to the nearest whole​ number.)

Answer 1

Calculation of Spending Variance for Variable Setup costs: Actual Number of Batches = 14800 Units/255 Units Per Batch = 58 Batches Total Variable Setup cost for actual production = 58 Batches x 77 Hrs x $48 = $214,368.00 Budgeted Setup cost for actual production = 14800 Units/230 Units Per Batch x 88 Hrs x $42 = $237,829.57 Spending Variance Variance = Actual Variable Setup Costs - Budgeted Setup costs = $214,368 - $237,829.57 = $ (23,461.57) FAVORABLE