Rollo Company Has Developed Cost Formulas for the Drivers of the Following

question 94

Multiple Choice

Rollo Company has developed cost formulas for the drivers of the following production activities:
$$\begin{array} { l l c c } \text { Driver } & \text { Activits } & \text { Fixed } & \text { Variale } \\\hline \text { Labour hours } & \text { Materials } & \$ 0 & \$ 20 \\\text { Labour hours } & \text { Labour } & 0 & 10 \\\text { Machine hours } & \text { Maintenance } & 10,000 & 8 \\\text { Machine hours } & \text { Machiring } & 50,000 & 2 \\\text { Number of setups } & \text { Inspections } & 30,000 & 200 \\\text { Number of setups } & \text { Setups } & 0 & 300 \\\text { Number of purchase arders } & \text { Purchasing } & 75,00 & 3\end{array}$$
-Refer to the figure.If the actual activity was 20 setups and the actual fixed cost for inspections was $28,000 and the variable cost for inspections was $5,000,what is the total variance for inspections due to?

• A)favourable variance on fixed costs
• B)unfavourable variance on fixed costs
• C)favourable variance on variable costs
• D)unfavourable variance on variable costs

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Definitions:

Revenue

The sum of earnings from selling goods or providing services which are fundamental to a company's core business activities.

Profit-Maximizes

The procedure an enterprise employs to find the optimal price and output level for maximum profit.

Long Run Adjustment

The process through which firms adjust their levels of production, capital, and other inputs to reach a new equilibrium in response to changes in market conditions over time.

Organic

Refers to products, especially food or farming methods, that are produced or conducted without the use of synthetic chemicals, fertilizers, or genetically modified organisms.