Mini-scenario 2 EasyTestElectricPlugs Inc. (ETEPI) provides electrical plug testing services for large corporate clients. In any month, the ETEPI qualified electricians are budgeted to test 40,000 units spread evenly over the month. Each unit test is expected to take two hours of an electrician's time. The company uses a flexed budget system to report its actual results against budget in order to identify variances and take corrective action where and when appropriate. ETEPI's budgeted charge to customers for each unit tested is $46 and it budgets to pay its electrician testers $15 per hour. Each test uses $5 of materials (fuses, wire and screws). All other costs of ETEPI are fixed. For the month of May, ETEPI's actual figures for its sales revenue and electrician labour costs were as follows: Actual units tested: 38,500 units at an average of $43 cach Actual electrician labour cost: 78,000 hours at $14 per hour Required: 1. What is the sales volume variance in $? (Show clearly all workings.) (2 marks) 2. What is the labour efficiency variance in $? (Show clearly all workings.) (2 marks) Month to month, ETEPI often incurs material price and material efficiency variances, both favourable and unfavourable. If there was a scarcity of fuses, wires and screws that drove up costs, what type of variance would that likely lead to? 3. (2 marks) 4. "A flexed budget is used for control purposes and a fixed budget is used for planning purposes'. Explain briefly the meaning of this statement. (2 marks) In a stable organisation, where costs are not expected to vary significantly, state whether an incremental' or a 'zero-based method of budgeting would be more suitable and explain why. (2 marks) 5