Manufacturing just completed a study of its purchasing activity with the objective of improving its efficiency. The driver for the activity is number of purchase orders. The following data pertain to the activity for the most recent year: supply: five purchasing agents capable of processing 3,400 orders per year (17,000 orders) Purchasing agent cost (salary): $49,700 per year Actual usage: 14,600 orders per year Value-added quantity: 9,500 orders per year Required: 1. Calculate the volume variance. Round your intermediate calculation to two decimal places and the final answer to the nearest dollar. $ 109,632. Unfavorable Uchdorf Activity 2. Calculate the unused capacity variance. Round your intermediate calculation to two decimal places and the final answer to the nearest dollar. $35,082.2 Favorable 3. What if the actual usage drops to 13,000 orders? What effect will this have on capacity management? Round your intermediate calculation to two decimal places and the final answer to the nearest dollar. Favorable

Manufacturing just completed a study of its purchasing activity with the objective of improving its efficiency. The driver for the activity is number of purchase orders. The following data pertain to the activity for the most recent year: supply: five purchasing agents capable of processing 3,400 orders per year (17,000 orders) Purchasing agent cost (salary): $49,700 per year Actual usage: 14,600 orders per year Value-added quantity: 9,500 orders per year Required: 1. Calculate the volume variance. Round your intermediate calculation to two decimal places and the final answer to the nearest dollar. $ 109,632. Unfavorable Uchdorf Activity 2. Calculate the unused capacity variance. Round your intermediate calculation to two decimal places and the final answer to the nearest dollar. $35,082.2 Favorable 3. What if the actual usage drops to 13,000 orders? What effect will this have on capacity management? Round your intermediate calculation to two decimal places and the final answer to the nearest dollar. Favorable

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter12: Activity-based Management

Section: Chapter Questions

Problem 5CE: Uchdorf Manufacturing just completed a study of its purchasing activity with the objective of...

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Uchdorf Manufacturing just completed a study of its purchasing activity with the objective of improving its efficiency. The driver for the activity is number of purchase orders. The following data pertain to the activity for the most recent year: Activity supply: five purchasing agents capable of processing 2,400 orders per year (12,000 orders) Purchasing agent cost (salary): 45,600 per year Actual usage: 10,600 orders per year Value-added quantity: 7,000 orders per year Required: 1. Calculate the volume variance and explain its significance. 2. Calculate the unused capacity variance and explain its use. 3. What if the actual usage drops to 9,000 orders? What effect will this have on capacity management? What will be the level of spending reduction if the value-added standard is met?
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