Question

Calculation of Value-Added and Non-Value-Added Costs, Activity Volume and Unused Capacity Variances Maquina Company produces custom-made...

Calculation of Value-Added and Non-Value-Added Costs, Activity Volume and Unused Capacity Variances

Maquina Company produces custom-made machine parts. Maquina recently has implemented an activity-based management (ABM) system with the objective of reducing costs. Maquina has begun analyzing each activity to determine ways to increase its efficiency. Setting up equipment was among the first group of activities to be carefully studied. The study revealed that setup hours was a good driver for the activity. During the last year, the company incurred fixed setup costs of $579,700 (salaries of 17 employees). The fixed costs provide a capacity of 26,350 hours (1,550 per employee at practical capacity). The setup activity was viewed as necessary, and the value-added standard was set at 1,550 hours. Actual setup hours used in the most recent period were 25,050.

Required:

1. Calculate the volume and unused capacity variances for the setup activity. Enter all amounts as positive values.

Volume Variance $
Unused Capacity Variance $

2. Prepare a report that presents value-added, non-value-added, and actual costs for setup.

Maquina Company
Value- and Non-Value-Added Cost Report
Value-Added Non-Value-Added Actual
Setting up $ $ $

Homework Answers

Answer #1

Calucation of value added, non value added and actual set up cost :

working notes:

no of emp 17
total fc 579700
per emp 34100
no of hours available 26350
actual set up hours 25050
value aded 1550
non valued added 23500
cost per hour 22
value added cost 34100
non valued added cost 517000
VALUE ADDED NON VALUE ADDED ACTUAL cost
34100 517000 551100

Calculation of capacity and volume variance

Capacity variance : (std hrs-actual hrs)* std rate

=(1473.529412-1550)*22

=  1682.352936(A)

Volume variance :(Actual labor hours - Budgeted labor hours) x Budgeted cost per hour

= (25050-26350)*22

=  28600(F)

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Calculation of Value-Added and Non-Value-Added Costs, Activity Volume and Unused Capacity Variances Maquina Company produces custom-made...
Calculation of Value-Added and Non-Value-Added Costs, Activity Volume and Unused Capacity Variances Maquina Company produces custom-made machine parts. Maquina recently has implemented an activity-based management (ABM) system with the objective of reducing costs. Maquina has begun analyzing each activity to determine ways to increase its efficiency. Setting up equipment was among the first group of activities to be carefully studied. The study revealed that setup hours was a good driver for the activity. During the last year, the company incurred...
Calculation of Value-Added and Non-Value-Added Costs, Activity Volume and Unused Capacity Variances Maquina Company produces custom-made...
Calculation of Value-Added and Non-Value-Added Costs, Activity Volume and Unused Capacity Variances Maquina Company produces custom-made machine parts. Maquina recently has implemented an activity-based management (ABM) system with the objective of reducing costs. Maquina has begun analyzing each activity to determine ways to increase its efficiency. Setting up equipment was among the first group of activities to be carefully studied. The study revealed that setup hours was a good driver for the activity. During the last year, the company incurred...
Value-Added and Non-Value-Added Costs, Unused Capacity For Situations 1 through 6, provide the following information: An...
Value-Added and Non-Value-Added Costs, Unused Capacity For Situations 1 through 6, provide the following information: An estimate of the non-value-added cost caused by each activity. If required, round your final answer to the nearest dollar. The root causes of the activity cost (such as plant layout, process design, and product design). The appropriate cost reduction measure: activity elimination, activity reduction, activity sharing, or activity selection. Choose " Multiple" in the Root cause column, wherever there is more than one root...
Chapter 12 Exercise 12.15 Trend Report, Non-Value-Added Costs. Refer to Exercise 12.14. Suppose that for 20x2,...
Chapter 12 Exercise 12.15 Trend Report, Non-Value-Added Costs. Refer to Exercise 12.14. Suppose that for 20x2, Sanford Inc., has chosen suppliers that provide higher-quality parts and redesigned its plant layout to reduce material movement. Additionally, Sanford implemented a new setup procedure and provided training for its purchasing agents. As a consequence, less setup time is required and fewer purchasing mistakes are made. At the end of 2020, the information shown on page 680 is provided. Activates                                Activity Driver                       SQ                  ...
Sanford, Inc., has developed value-added standards for four activities: purchasing parts, receiving parts, moving parts, and...
Sanford, Inc., has developed value-added standards for four activities: purchasing parts, receiving parts, moving parts, and setting up equipment. The activities, the activity drivers, the standard and actual quantities, and the price standards for 20x1 are as follows: Activities Activity Driver     SQ     AQ     SP Purchasing parts Purchase orders 1,900 3,250 $110 Receiving parts Receiving orders 3,800 6,500 340 Moving parts Number of moves 0 2,300 390 Setting up equipment Setup hours 0 6,200 265 The actual prices paid per unit...
Alden Company uses a two-variance analysis for overhead variances. Practical capacity is defined as 36 setups...
Alden Company uses a two-variance analysis for overhead variances. Practical capacity is defined as 36 setups and 36,000 machine hours to manufacture 7,200 units for the year. Selected data for 2016 follow:   Budgeted fixed factory overhead:      Setup   $ 57,600         Other 265,000 $ 322,600   Total factory overhead incurred $ 494,000   Variable factory overhead rate:      Per setup $ 650      Per machine hour $ 4   Total standard machine hours allowed for the units manufactured 24,000 hours   Machine hours actually worked 28,000 hours...
Alden Company uses a two-variance analysis for overhead variances. Practical capacity is defined as 36 setups...
Alden Company uses a two-variance analysis for overhead variances. Practical capacity is defined as 36 setups and 36,000 machine hours to manufacture 7,200 units for the year. Selected data for 2016 follow:   Budgeted fixed factory overhead:      Setup   $ 57,600         Other 265,000 $ 322,600   Total factory overhead incurred $ 494,000   Variable factory overhead rate:      Per setup $ 650      Per machine hour $ 4   Total standard machine hours allowed for the units manufactured 24,000 hours   Machine hours actually worked 28,000 hours...
Calculating the Fixed Overhead Spending and Volume Variances Standish Company manufactures consumer products and provided the...
Calculating the Fixed Overhead Spending and Volume Variances Standish Company manufactures consumer products and provided the following information for the month of February: Units produced 131,300 Standard direct labor hours per unit 0.2 Standard fixed overhead rate (per direct labor hour) $2.20 Budgeted fixed overhead $64,800 Actual fixed overhead costs $68,700 Actual hours worked 26,500 Required: 1. Calculate the fixed overhead spending variance using the formula approach. Calculate the volume variance using the formula approach. What if 127,300 units had...
Exercise 23-20 Computation of volume and controllable overhead variances LO P3 World Company expects to operate...
Exercise 23-20 Computation of volume and controllable overhead variances LO P3 World Company expects to operate at 80% of its productive capacity of 50,000 units per month. At this planned level, the company expects to use 25,000 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate of 0.625 direct labor hours per unit. At the 80% capacity level, the total budgeted cost includes $50,000 fixed overhead cost and $275,000 variable overhead cost. In the...
Cost of Quality and Value-Added/Non-Value-Added Reports for a Service Company Three Rivers Inc. provides cable TV...
Cost of Quality and Value-Added/Non-Value-Added Reports for a Service Company Three Rivers Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Three Rivers are identified as follows: a. Identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added. Quality Control Activities Activity Cost Quality Cost Classification Value-Added/ Non-Value-Added Classification Billing error correction $39,000 External failure Non-value-added Cable signal testing 117,000 Appraisal Value-added Reinstalling service (installed...