Menu for #1 - Rico Company produces custom-made machine parts. Rico recently has...
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Rico Company produces custom-made machine parts. Rico recently has implemented an activity-based management (ABM) system with the objective of reducing costs. Rico has begun analyzing each activity to determine ways to increase its efficiency. Setting up equipment was among the first group of activities to be carefully studied. The study revealed that setup hours was a good driver for the activity. During the last year, the company incurred fixed setup costs of $465,120 (salaries of 12 employees). The fixed costs provide a capacity of 24,480 hours (2,040 per employee at practical capacity). The setup activity was viewed as necessary, and the value-added standard was set at 2,040 hours. Actual setup hours used in the most recent period were 22,580. Required: 1. Calculate the volume and unused capacity variances for the setup activity. Enter all amounts as positive values. Volume Variance Unused Capacity Variance 2. Prepare a report that presents value-added, non-value-added, and actual costs for setup. Rico Company Value- and Non-Value Added Cost Report Value Added Non-Value Added Actual Setting up Favorable Unfavorable
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