Electric Eels Company produces high-quality electric eels for Museums and Aquaria to sell in their gift shops. It accounts for the production of these eels with an ABC system. For 2015, Electric Eels expected to produce and sell 16,000 units, but actual output was only 15,000 units.

You are a new management accountant at the company. You have been asked to calculate the variances for the batch-level costs. The two main batch-level costs are setup and quality inspection. Quality inspection is driven by inspection-hours, and setup is driven by the number of setup-hours.

Required
1. Calculate the flexible-budget, rate, and efficiency variances for both batch activities.
2. Write a short memo to your boss, the controller, explaining the variances that you calculated.

Transcribed Image Text:

Setup Quality Inspection Static Budget: Batch size (units per batch Cost driver (hours) per batch Cost per hour Batch size (units per batch) Cost driver (hours) per batch Cost per hour 100 120 10 $17.50 100 S10.75 Actual Result: 75 S12.00 S15.50