Chapter 11, Problem 4E

1.

To determine

Introduction: Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively. Variable costs per unit do not change with the change in activity base. The reason is that total variable costs positively change in approximate proportion to a change in an activity. That is why variable costs per unit remain the same at any level of output.

The variable cost charged to Northern Plant and Southern Plant.

2.

To determine

Introduction: Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The fixed costs charged to Northern Plant and Southern Plant.

3.

To determine

Introduction: Spending variance shows the relationship between the budgeted cost and the actual cost incurred. If the budgeted cost is more than the actual cost incurred, then it is termed a favorable spending variance and vice versa.

The amount of spending variance which is not charged to the plants.