Reference no: EM132473751

OzPlastic Co. produces a special line of plastic toy racing cars. OzPlastic produces the cars in batches. To manufacture a batch of the cars, OzPlastic must set up the machines and moulds. Set-up costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Set-up Department is responsible for setting up machines and moulds for different styles of car.

Set-up overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of set-up-hours. The following information pertains to June 2018:

                                                        Actual                               Static-budget

                                                                        Amounts                            Amounts

Units produced and sold                          30 000                            22 500

Batch size (number of units per batch)          250                                225

Set-up-hours per batch                                5                                5.25

Variable overhead cost per set-up-hour         $40                                $38

Total fixed setup overhead costs              $14 400                           $14 000

Question 1: Calculate the efficiency variance for variable set-up overhead costs.

1. $600 favourable
2. $600 unfavourable
3. $3800 favourable
4. $3800 unfavourable