Figure 16-2
Glenn, SA., has done a cost analysis for its production of T-shirts. The following activities and cost drivers have been developed: $\begin{array}{ll}
\text { Activity } & \text { Cost Formula } \
\text { Maintenance } & £ 11,000+£ 2 \text { per machine hour } \
\text { Machining } & £ 55,000+£ 3 \text { per machine hour } \
\text { Inspection } & £ 70,000+£ 500 \text { per batch } \
\text { Setups } & £ 2,000 \text { per batch } \
\text { Purchasing } & £ 80,000+£ 150 \text { per purchase order }
\end{array}$ Following are the actual costs of producing 75,000 T-shirts: 5,000 machine hours; 10 batches; 20 purchase orders $\begin{array}{lr}
\text { Maintenance } & £ 20,000 \
\text { Machining } & 73,000 \
\text { Inspection } & 73,000 \
\text { Setups } & 18,000 \
\text { Purchasing } & 82,000
\end{array}$
-Refer to Figure 16-2. What is the budget variance for total costs in an activity-based performance report?
A)£1,000 F
B)£2,000 F
C)£3,000 F
D)none of the above

Question

Quizplus · Accepted Answer

The budgeted costs are calculated as follows: Maintenance: £11,000 + (£2 * 5,000) = £21,000; Machining: £55,000 + (£3 * 5,000) = £70,000; Inspection: £70,000 + (£500 * 10) = £75,000; Setups: £2,000 * 10 = £20,000; Purchasing: £80,000 + (£150 * 20) = £83,000. Total budgeted costs = £269,000. Actual costs = £266,000. Variance = £269,000 - £266,000 = £3,000 favorable (F).

Figure 16-2 Glenn, SA Following Are the Actual Costs of Producing 75,000 T-Shirts: 5,000

Figure 16-2
Glenn, SA Following Are the Actual Costs of Producing 75,000 T-Shirts: 5,000