Merric Company uses an activity-based costing system. Four activities have been

Question

Merric Company uses an activity-based costing system. Four activities have been identified. The setup activity uses the number of setups as its cost driver. The following budget information is available for this activity:

$240,000

$    5,400

The company expects to perform 25 setups in May.

Refer to Figure 11-5. Actual costs incurred were $246,000 fixed and $144,000 variable. If the actual number of setups in May was 30, what is the activity-based flexible budget variance?

Fixed costs per month

$240,000

Variable cost per setup

$    5,400

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Answer is 12000 (Favorable)

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Notes:

Variable Costs (30 Setups) = 30*5400 = 162000

Thanks.

Flexible Budget 30 Setups Actual Costs Variance Favorable/Unfavorable Fixed Costs 240000 246000 -6000 Unfavorable Variable Costs 162000 144000 18000 Favorable Total 402000 390000 12000 Favorable

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