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Question - 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: ten purchasing agents capable of processing 2,400 orders per year (24,000 orders).
Purchasing agent cost (salary): $50,300 per year.
Actual usage: 22,600 orders per year.
Value-added quantity: 13,000 orders per year.
Required -
1. Calculate the volume variance.
2. Calculate the unused capacity variance.
3. What if the actual usage drops to 18,000 orders? What effect will this have on capacity management?
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