Rollo Company has developed cost formulas for the drivers of the following production activities:
- If the actual activity was 20 setups and the actual fixed cost for inspections was $28,000 and the variable cost for inspections was $5,000, the total variance for inspections is due to
A) favorable variance on fixed costs.
B) unfavorable variance on fixed costs.
C) favorable variance on variable costs.
D) unfavorable variance on variable costs.

Question

Rollo Company has developed cost formulas for the drivers of the following production activities: 
- If the actual activity was 20 setups and the actual fixed cost for inspections was $28,000 and the variable cost for inspections was $5,000, the total variance for inspections is due to
A) favorable variance on fixed costs. 
B) unfavorable variance on fixed costs. 
C) favorable variance on variable costs. 
D) unfavorable variance on variable costs.

Quizplus · Accepted Answer

The total variance for inspections is due to a favorable variance on fixed costs because the actual fixed cost for inspections was $28,000, which is less than the budgeted fixed cost for inspections.

Rollo Company Has Developed Cost Formulas for the Drivers of the Following