Davis Industries' Activity-Based Performance Report Revealed That Actual Inspection Costs

Essay

Davis Industries' activity-based performance report revealed that actual inspection costs totaled £225,000 at an actual activity level of 80 inspections. Further analysis of inspection costs revealed the following: $\begin{array}{l}&\text { Actual Cost } & \text { Budgeted Cost } \\\text { Inspection costs: }\\\text { Fixed } & £ 90,000 & £ 84,000 \\\text { Variable } & 60,000 & 56,000\end{array}$ Fixed inspection costs consist of the salaries of four inspectors, paid £21,000 each. Each inspector is capable of efficiently conducting inspections of 50 batches. Variable inspection costs consist of materials used during the inspections.
a.Calculate the following fixed activity budget variances for inspection:Total fixed activity varianceFixed spending varianceVolume varianceUnused capacity variance
b.Calculate the following variable activity budget variances for inspection:Spending varianceEfficiency variance