Answer the following questions using the information below:

Munoz, Inc., produces a special line of plastic toy racing cars. Munoz, Inc., produces the cars in batches. To manufacture a batch of the cars, Munoz, Inc., must set up the machines and molds. 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 molds for different styles of car.

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:

-Calculate the spending variance for fixed setup overhead costs.
A) $3,200 unfavorable
B) $2,025 unfavorable
C) $3,600 unfavorable
D) $2,025 favorable

Question

Answer the following questions using the information below:

Munoz, Inc., produces a special line of plastic toy racing cars. Munoz, Inc., produces the cars in batches. To manufacture a batch of the cars, Munoz, Inc., must set up the machines and molds. 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 molds for different styles of car.

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:

-Calculate the spending variance for fixed setup overhead costs.
A) $3,200 unfavorable 
B) $2,025 unfavorable 
C) $3,600 unfavorable 
D) $2,025 favorable

Quizplus · Accepted Answer

The spending variance for fixed setup overhead costs is calculated by comparing the actual fixed setup overhead costs to the budgeted fixed setup overhead costs. If the actual costs are higher than the budgeted costs, the variance is unfavorable. In this case, the variance is $2,025 unfavorable.

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