Engines Unlimited manufactures motorcycle engines and uses flexible budgeting and ABC. The companys budget for variable overhead

Engines Unlimited manufactures motorcycle engines and uses flexible budgeting and ABC. The company’s budget for variable overhead is $30,000 and the budget for fixed overhead is $24,000. When the company analyzes overhead using ABC, the budgeted overhead of $54,000 is traced to three activities: assembly, finishing, and inspection. The costs associated with each activity and their respective cost drivers are as follows:

The actual cost and total volume for each activity are as follows:

Required

A. Compute the overhead application rate for each activity.

B. Using the actual volume and cost, compute the spending variance, the efficiency variance, and the total variance for eachactivity.

Transcribed Image Text:

Flexible Budget Activity Amount Cost Driver Budgeted Volume Assembly $32,000 Labor hours 3,200 Finishing 14,000 Labor hours 1,000 Inspections 8,000 Number of inspections 320