Answer the Following Questions Using the Information Below:
OzPlastic Co

question 47

Multiple Choice

Answer the following questions using the information below:
OzPlastic Co.produces a special line of plastic toy racing cars.OzPlastic produces the cars in batches.To manufacture a batch of the cars,OzPlastic must set up the machines and moulds.Set-up costs are batch-level costs because they are associated with batches rather than individual units of products.A separate Set-up Department is responsible for setting up machines and moulds for different styles of car.
Set-up overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of set-up-hours.The following information pertains to June 2018:
$$\begin{array} { l r r } & \text { Actual } & \text { Static-budget } \\& \text { Amounts } & \text { Amounts } \\ \text { Units produced and sold } & 30000 & 22500 \\ \text { Batch size (number of units per batch) }& 250 & 225 \\\text { Set-up-hours per batch } & 5 & 5.25 \\ \text { Variable overhead cost per set-up-hour } & \$ 40 & \$ 38 \\\text { Total fixed setup overhead costs }& \$ 14400 & \$ 14000\end{array}$$
-Calculate the spending variance for variable set-up overhead costs.

• A)$3800 favourable
• B)$3800 unfavourable
• C)$1200 unfavourable
• D)$1200 favourable

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Definitions:

Required Production

The quantity of goods or products a company needs to produce to meet its planned sales demand.

Production Budget

An estimate of the total units of production needed to meet anticipated sales demand and inventory requirements.

Sales Budget

A detailed schedule showing expected sales expressed in both dollars and units.

Budgeting

The process of creating a plan to spend your money, outlining projected income and expenses for a certain period.