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

question 3

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

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Definitions:

Operations Management

The administration of business practices designed to ensure maximum efficiency within an organization, focusing on the management of processes to produce and distribute products and services.

Demand Curve

A graph showing the relationship between the price of a product and the quantity demanded by consumers.

Chase Aggregate Plan

A planning approach that adjusts production rates and workforce levels to match demand fluctuations, minimizing inventory and staffing costs.

Hiring Workers

The process of identifying, recruiting, selecting, and onboarding individuals to fill job vacancies.