Vroom-Vroom manufactures miniature cars and has determined that its total manufacturing cost of $1,500,000 is a mixture of unit-
level costs, product-level costs, and facility-level costs. Vroom-Vroom has assembled the following information concerning the manufacturing costs and the driver used to allocate the costs in each activity pool (units and product lines). Facility-level costs are not allocated to production. Total Manufacturing Costs Collector Products Retail Products Unit-level costs $600,000 200,000 units 800,000 units Product-level costs 700,000 25 lines 30 lines Facility costs 200,000 N/A N/A $1,500,000 How much cost would be allocated to the Retail division under an activity-based costing system that reflects an appropriate hierarchy? (Please round to the nearest dollar at the end of your calculations)
1 answer:
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Answer:
Favorable for price and unfavorable for usage.
Explanation:
Provided Information,
Standard Material = 2.2 pounds per unit
Standard cost = $2 per pound
Actual Quantity = 2.3 pounds per unit
Actual cost = $1.95 per pound
In Material Price variance we have = (Standard Price - Actual Price) Actual Quantity
Since Standard Price $2 is more than actual price = $1.95 the variance is favorable.
In material quantity variance we have = (Standard Quantity - Actual Quantity) Standard Rate
Since actual quantity used = 2.3 pounds is more than standard 2.2 pounds the variance will be unfavorable
Therefore, Price Variance = Favorable, and Quantity Variance = Unfavorable.