Figure 16-4
Villafane, SA., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed: $\begin{array}{ll}
\text { Activity } & \text { Cost Formula } \
\text { Design } & £ 5,000+£ 0.05 \text { per machine hour } \
\text { Machining } & £ 25,000+£ 0.01 \text { per machine hour } \
\text { Setups } & £ 35 \text { per batch } \
\text { Purchasing } & £ 50+£ 15 \text { per purchase order }
\end{array}$ Following are the actual costs of producing 35,000 decals: 1,000 machine hours; 5 batches; 30 purchase orders $\begin{array}{lr}
\text { Design } & £ 5,080 \
\text { Machining } & ? \
\text { Setups } & ? \
\text { Purchasing } & £ 600
\end{array}$ The following variances were given in the activity performance report: $\begin{array}{lr}
\text { Design } & ? \
\text { Machining } & £ 40 \mathrm{~F} \
\text { Setups } & £ 15 \mathrm{~F} \
\text { Purchasing } & ?
\end{array}$
-Refer to Figure 16-4. What is the actual cost of machining?
A)£24,970
B)£25,010
C)£25,050
D)none of the above

Question

Quizplus · Accepted Answer

The actual cost of machining can be calculated by subtracting the favorable variance from the budgeted cost. The budgeted cost for machining is £25,000 + (£0.01 per machine hour * 1,000 machine hours) = £25,010. Given a £40 favorable variance, the actual cost is £25,010 - £40 = £24,970.

Figure 16-4 Villafane, SA Following Are the Actual Costs of Producing 35,000 Decals: 1,000

Figure 16-4
Villafane, SA Following Are the Actual Costs of Producing 35,000 Decals: 1,000