Activity-based costs, variance analysis. King Taste is a manufacturer of fruit cakes. One of its plants produces five different cake products. Each cake product differs in terms ofmaterial inputs (different fruits, flour, and liquor). They are identical in terms of both the cooking and the setup processes.

King Taste prefers to make long production runs of each cake product. A major benefit is that fewer changeovers are made. A changeover is the process ofswitching the production line from the manufacture of one product to another product. The costs of a changeover are a batch cost. They comprise the labour cost ofthe workers who clean the mixing equipment so that the contents of each different product are not mixed together. The following informa¬

tion pertains to March 2007.

Static-Budget Actual Amounts Amounts Units of cakes produced and sold 240,000 330,000 Average number of cakes per production run 6,000 10,000 Changeover labour-hours per production ran 20 hours 24 hours Changeover labour cost per hour $24 $25 Required 1. Compute the flexible-budget variance for total changeover labour costs in March 2007.
Comment on the results.
2. Compute the price and efficiency variance for total changeover labour costs in March 2007. Comment on the results.
3. Provide two explanations for each of the price and efficiency variances in requirement 2.