Question:
(Conversion cost variances) Sanchez Mfg. budgeted $1,080,000 of variable conversion costs and $360,000 of fixed conversion costs for May 2001. When the budget was developed, Sanchez estimated 72,000 machine hours would be required to make 24,000 units of product. During May, 76,000 machine hours were worked and the firm incurred $1,128,600 of variable conversion costs and $374,000 of fixed conversion costs. Twenty-five thousand units were producedin May.
a. Calculate the four conversion cost variances assuming separation of fixedand variable costs is maintained.
b. Calculate the three conversion cost variances assuming fixed and variable costs are combined.