Variance Analysis with Activity-Based Costing. Assume Spindle Company uses activity-based costing to allocate variable manufacturing overhead costs to products. The company identified three activities with the following information for last quarter.

Activity	Standard Rate	Standard Quantity per Unit Produced	Actual Costs	Actual Quantity
Indirect materials	$5 per yard	14 yards per unit	$4,850,000	990,000 yards
Product testing	$3 per test minute	10 minutes per unit	$2,000,000	650,000 test minutes
Indirect labor	$9 per direct labor hour	6 hours per unit	$3,800,000	410,000 direct labor hours

Required:

1. Assume Spindle Company produced 70,000 units last quarter. Prepare a variance analysis using the format shown in Figure 4.11 Variable Overhead Variance Analysis for Jerrys Ice Cream Using Activity-Based Costing. Clearly label each variance as favorable or unfavorable.
2. Company policy is to investigate all variances above 5 percent of the flexible budget amount for each activity. Identify the variances that should be investigated according to company policy. Show calculations to support your answer.

Format:

Standard Variable Overhead Cost (Flexible Budget) = SQ SR 2,100 orders $25 per order =$52,500 Product Testing 210,000 minutes $0.20 per minute =$36,000 =$42,000 effici =$40 \begin{tabular}{|l|} $(12,500) favorable \\ efficiency variance \end{tabular} Energy minutes $0.05 per minute 420,000 minutes $0.05 per minute =$28,750 =$21,000 \begin{tabular}{l} $7,750 unfavorable \\ efficiency variance \\ \hline \end{tabular}