Question

Matterhorn, Inc., produces a special line of toy racing cars. Matterhorn produces the

cars in batches. To manufacture each batch of the cars, Matterhorn must set up the

machines and molds. Setup costs are batch-level costs and are fixed with respect to

the number of setup-hours. A separate Setup Department is responsible for setting up

machines and molds for each style of car. The following information pertains to July

2017:

Actual Amounts Static-budget Amounts

Units produced and sold 15,000 11,250

Batch size (number of units per batch) 250 225

Setup-hours per batch 5 5.25

Total fixed setup overhead costs $12,000 $9,975

Calculate the following:

a. the spending variance for fixed setup overhead costs;

b. the budgeted fixed setup overhead rate; and

c. the production-volume variance for fixed overhead setup costs.

Answer 1