Max Canine Products produces high-quality dog food distributed only through veterinary offices. To ensure that the food is of the highest quality and has taste appeal, Max Canine has a rigorous inspection process. For quality control purposes, Max Canine has a standard based on the pounds of food inspected per hour and the number of pounds that pass or fail the inspection. Max Canine expects that for every 13,000 pounds of food produced, 1,300 pounds of food will be inspected. Inspection of 1,300 pounds of dog food should take 1 hour. Max Canine also expects that 5% of the food inspected will fail the inspection. During the month of May, Supreme produced 2,990,000 pounds of food and inspected 292,500 pounds of food in 200 hours. Of the 292,500 pounds of food inspected, 15,625 pounds of food failed to pass the inspection.
1. Compute two variances that help determine whether the time spent on inspections was more or less than expected. (Follow a format similar to the one used for the variable overhead spending and efficiency variances, but without prices.)
2. Compute two variances that can be used to evaluate the percentage of the food that fails the inspection.