Walterboro, Inc., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed: $\begin{array}{ll}
\text { Activity } & \text { Cost Formula } \
\text { Maintenance } & \$ 11,000+\$ 0.11 \text { per machine hour } \
\text { Machining } & \$ 25,000+\$ 0.50 \text { per machine hour } \
\text { Setups } & \$ 50 \text { per batch } \
\text { Purchasing } & \$ 200+\$ 45 \text { per purchase order }
\end{array}$
Following are the actual costs of producing 85,000 decal s: 5,000 machine hours; 10 batches; 20 purchase orders

$\begin{array}{lr}
\text { Maintenance } & \$ 11,500 \
\text { Machining } & 28,300 \
\text { Setups } & 550 \
\text { Purchasing } & 1,000
\end{array}$ What is the budget variance for machining in an activity-based performance report?
A)$50 F
B)$50 U
C)$800 U
D)$800 F

Question

Walterboro, Inc., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed: $\begin{array}{ll}
\text { Activity } & \text { Cost Formula } \
\text { Maintenance } & \$ 11,000+\$ 0.11 \text { per machine hour } \
\text { Machining } & \$ 25,000+\$ 0.50 \text { per machine hour } \
\text { Setups } & \$ 50 \text { per batch } \
\text { Purchasing } & \$ 200+\$ 45 \text { per purchase order }
\end{array}$
Following are the actual costs of producing 85,000 decal s: 5,000 machine hours; 10 batches; 20 purchase orders

$\begin{array}{lr}
\text { Maintenance } & \$ 11,500 \
\text { Machining } & 28,300 \
\text { Setups } & 550 \
\text { Purchasing } & 1,000
\end{array}$ What is the budget variance for machining in an activity-based performance report?
A)$50 F
B)$50 U
C)$800 U
D)$800 F

Quizplus · Accepted Answer

The budget variance for machining is calculated as the difference between the actual cost and the budgeted cost. The budgeted cost for machining is calculated as follows: $ \$25,000 + (5,000 \text{ machine hours} \times \$0.50) = \$25,000 + \$2,500 = \$27,500 $. The actual cost is \$28,300. Therefore, the variance is $ \$28,300 - \$27,500 = \$800 $ unfavorable, because the actual cost is higher than the budgeted cost.

Walterboro, Inc Following Are the Actual Costs of Producing 85,000 Decal S