8-40 Activity-based costing, batch-level variance analysis. (LO 3) The Saluki Company specializes in making fraternity a

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8 40 Activity Based Costing Batch Level Variance Analysis Lo 3 The Saluki Company Specializes In Making Fraternity A 1 (326.9 KiB) Viewed 46 times

8-40 Activity-based costing, batch-level variance analysis. (LO 3) The Saluki Company specializes in making fraternity and sorority T-shirts for the university market. Due to the high setup costs for each batch printed, Saluki holds the T-shirt requests until demand is approximately 100 shirts. At that point Saluki will schedule the setup and production of the shirts. For rush orders, Saluki will produce smaller batches for an additional charge of $175 per setup. Budgeted and actual costs for the production process for the year were as follows: Static-Budget Amounts 125,000 100 Actual Results 114,000 95 Number of shirts produced Average number of shirts per setup Hours to set up machines Direct variable cost per setup-hour Total fixed setup overhead costs 5 5.20 $ 30 $ 32 $56,000 $56,250 Required 1. What is the static budget number of setups for the year? 2. What is the flexible-budget number of setups for the year? 3. What is the actual number of setups during the year? 4. Assuming fixed setup overhead costs are allocated using setup-hours, what is the predetermined fixed setup overhead allocation rate? 5. Does Saluki's charge of $175 cover the budgeted direct variable cost of an order? The budgeted total cost? 6. For direct variable setup costs, compute the price and efficiency variances. 7. For fixed setup overhead costs, compute the spending and the production-volume variances. 8. What qualitative factors should Saluki consider before accepting or rejecting a special order?