Answer the Following Questions Using the Information Below:
Lukehart Industries

question 152

Multiple Choice

Answer the following questions using the information below:
Lukehart Industries, Inc., produces air purifiers. Lukehart, Inc., produces the air purifiers in batches. To manufacture a batch of the purifiers, Lukehart, Inc., must set up the machines and assembly line tooling. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and tooling for different models of the air purifiers.
Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours. The following information pertains to June 2015:
$\begin{array}{lrr}&\text { Budget } & \text { Actual } \\&\text { Amounts } & \text { Amounts }\\\text { Units produced and sold } & 10,000 & 9,000 \\\text { Batch size (number of units per batch) } & 400 & 375 \\\text { Setup-hours per batch } & 6 & 5.5 \\\text { Variable overhead cost per setup-hour } & \$ 50 & \$ 52 \\\text { Total fixed setup overhead costs } & \$ 18,000 & \$ 17,750\end{array}$
-Calculate the spending variance for variable overhead setup costs.

• A) $150 unfavorable
• B) $150 favorable
• C) $264 unfavorable
• D) $264 favorable

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Definitions:

Capital Contributions

Monetary or non-monetary assets provided by partners or shareholders to increase the capital of a partnership or corporation.

LLC

A limited liability company, which is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.

Distribution of Profits

The allocation of a company's earnings to its shareholders or owners, typically in the form of dividends.

Dissolution

The official termination of an entity's existence, such as a corporation or partnership, through legal processes.