Answer the Following Questions Using the Information Below:
Coober Pedy

question 134

Multiple Choice

Answer the following questions using the information below:
Coober Pedy Industries produces air purifiers.Coober Pedy produces the air purifiers in batches.To manufacture a batch of the purifiers,Coober Pedy must set up the machines and assembly line tooling.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 tooling for different models of the air purifiers.
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:
$$\begin{array} { l r r } & \begin{array} { r } \text { Budget } \\\text { Amounts }\end{array} & \begin{array} { r } \text { Actual } \\\text { Amounts }\end{array} \\\text { Units produced and sold } & 10000 & 9000 \\\text { Batch size (number of units per batch) } & 400 & 375 \\\text { Set-up-hours per batch } & 6 & 5.5 \\\text { Variable overhead cost per set-up-hour } & \$ 50 & \$ 52 \\\text { Total fixed set-up overhead costs } & \$ 18000 & \$ 17750\end{array}$$
-Calculate the efficiency variance for variable set-up overhead costs.

• A)$150 favourable
• B)$264 unfavourable
• C)$114 favourable
• D)$264 favourable

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Definitions:

Variable Manufacturing Overhead

The portion of manufacturing overhead costs that varies with production volume, such as utility costs in a factory.

Product Costs

Costs directly associated with the manufacturing of goods, including direct materials, direct labor, and manufacturing overhead.

Absorption Costing

A financial method that integrates all production-related costs — direct materials, direct labor, and both variable and fixed overheads — into the cost calculation of a product.