Jo Publishing Company specialises in printing specialty textbooks for a small but profitable university market. Due to the high set-up costs for each batch printed, Jo Publishing holds the book requests until demand for a book is approximately 500. At that point, Jo Publishing will schedule the set-up and production of the book. For rush orders, Jo Publishing will produce smaller batches for an additional charge of $400 per set -up. Budgeted and actual costs for the printing process for 2016 were:
Static-budget amounts Actual results
Number of books produced 300,000 324,000
Average number of books per set-up 500 480
Hours to set up printers 8 hours 8.2 hours
Direct variable cost per set-up hour $40 $39
Total fixed set-up overhead costs $105,600 $119,000
Required:1. What is the static budget number of set-ups for 2016?
2. What is the flexible budget number of set-ups for 2016?
3. What is the actual number of set-ups in 2016?
4. Assuming fixed set-up overhead costs are allocated using set-up hours, what is the predetermined fixed set-up overhead allocation rate?
5. Does Jo Publishing's charge of $400 cover the budgeted variable overhead cost of an order? The budgeted total overhead cost?
6. For variable set-up overhead costs, calculate the spending and efficiency variances.
7. For fixed set-up overhead costs, calculate the spending and the production-volume variances.
8. What qualitative factors should Ho Publishing consider before accepting or rejecting a special order?