Cost Accounting 15th edition Ch8-P35 Activity-based costing, batch-level varianc
ID: 2535357 • Letter: C
Question
Cost Accounting 15th edition Ch8-P35
Activity-based costing, batch-level variance analysis. Audrina's Fleet Feet, Inc., produces dance shoes for stores all over the world. While the pairs of shoes are boxed individually, they are crated and shipped in batches. The shipping department records both variable direct batch- level costs and fixed batch-level overhead costs. The following information pertains to shipping department costs for 2014. Static-Budget Amounts Actual Results Pairs of shoes shipped Average number of pairs of shoes per crate Packing hours per crate Variable direct cost per hour Fixed overhead cost 225,000 15 0.9 hours $18 180,000 10 .1 hour $16 S56,500 1. What is the static budget number of crates for 2014? 2. What is the flexible budget number of crates for 2014? 3. What is the actual number of crates shipped in 2014? 4. Assuming fixed overhead is allocated using crate-packing hours, what is the predetermined fixed overhead allocation rate? 5. For variable direct batch-level costs, compute the price and efficiency variances. 6. For fixed overhead costs, compute the spending and the production-volume variancesExplanation / Answer
1. Static budget = Budgeted pairs of shoes shipped / Budgeted average no. of pairs of shoes per crate = 225,000 / 15 = 15,000 crates
2. Flexible budget = Actual pairs of shoes shipped / Budgeted average no. of pairs of shoes per crate = 180,000 / 15 = 12,000 crates
3. Actual no. of crates shipped = Actual pairs of shoes shipped / Actual average no. of pairs of shoes per crate = 180,000 / 10 = 18,000 crates
4. Static budget no. of hours = Budgeted no. of crates * Budgeted hours per box = 15,000 * 0.9 = 13,500 hours
Fixed overhead rate = Budgeted fixed overhead cost / Static budget no. of hours = $54,000 / 13500 = $4/hour
5. Actual variable cost = 18,000 * 1.1 * 16 = $316,800
Actual hours * Budgeted rate = 18,000 * 1.1 * 18 = $356,400
Budgeted hours * Budgeted rate = 12,000 * 0.9 * 18 = $194,400
Price variance = 356,400 - 316,800 = 39,600 favourable
Efficiency variance = 194,400 - 356,400 = $162,000 unfavourable
6.
Actual fixed overhead cost = $56,500
Static budgeted fixed overhead cost = $54,000
Budgeted hours allowed for actual output * Budgeted rate = $12,000 * 0.9 * 4 = $43,200
Spending variance = $54,000 - $56,500 = $2,500 unfavourable
Production volume variable = $43,200 - $54,000 = $10,800 unfavourable