Exhibit 10-5
Catalina Company Uses Activity-Based Costing to Allocate Variable

Multiple Choice

Exhibit 10-5
Catalina Company uses activity-based costing to allocate variable manufacturing overhead costs to products.The company produced 1,800 units of product last month,and identified three activities with the following information for last month.
$\begin{array}{lcccc}&&\text { Standard} & \text { Actual } & \text { Actual } \\&&\text { Quantity }\\\text { Activity } & \text { Standard Rate } & \text { per Unit } & \text { Costs } & \text { Quantity } \\&&\text { Produced }\\\hline \text { Purchase }& \$ 80 \text { per order } & 0.50 \text { order per unit } & \$ 78,000 & 1,000 \text { order's } \\\text { orders }\\ \text { Product testing } &\$ 10 \text { per test } &0.9 \text { minutes per } & \$ 28,000&2,000 \text { test } \\&\text { minute }&\text { unit }&&\text { minutes }\\ \text { direct labor } & \$ 16 \text { per direct } & 5 \text { hours per unit } & \$ 140,000 & 8,000 \text { direct } \\&\text{labor hour}&&&\text{labor hour}\end{array}$
-Refer to Exhibit 10-5.What is the variable overhead spending variance for the indirect labor activity?

A) $12,000 favorable
B) $12,000 unfavorable
C) $16,000 favorable
D) $16,000 unfavorable
E) None of the answer choices is correct.