Bienestar, Inc Following Are the Actual Costs of Producing 75,000 Vests: 5,000

question 175

Multiple Choice

Bienestar, Inc., has done a cost analysis for its production of vests. The following activities and cost drivers have been developed: $\begin{array} { l l } \text { Activity } & \text { Cost Formula } \\ \text { Maintenance } & \$ 11,000 + \$ 2 \text { per machine hour } \\ \text { Machining } & \$ 55,000 + \$ 3 \text { per machine hour } \\ \text { Inspection } & \$ 70,000 + \$ 500 \text { per batch } \\ \text { Setups } & \$ 2,000 \text { per batch } \\ \text { Purchasing } & \$ 80,000 + \$ 150 \text { per purchase order } \end{array}$
Following are the actual costs of producing 75,000 vests: 5,000 machine hours; 10 batches; 20 purchase orders
$\begin{array}{lr}\text { Maintenance } & \$ 20,000 \\\text { Machining } & 73,000 \\\text { Inspection } & 73,000 \\\text { Setups } & 18,000 \\\text { Purchasing } & 82,000\end{array}$ What is the budget variance for total costs in an activity-based performance report?

• A)$1,000 F
• B)$2,000 F
• C)$3,000 F
• D)none of these

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Definitions:

IRR Method

The Internal Rate of Return method, a capital budgeting technique used to evaluate and compare the profitability of investments or projects.

Hurdle Rate

The minimum rate of return on an investment required by a manager or investor.

Capital-Budgeting

The process that a company undergoes to evaluate potential major projects or investments, such as new machinery or expansion plans.

Risk-Free Rate

The expected yield from an investment that carries no risk of losing money, often shown through the interest rates of government securities.