Q2. Data Processors Inc. performs credit card services for banks. The company uses an ABC system. Following is information for the past year: Activity Estimated Cost Actual Cost Cost Driver Estimated Activity Level Actual Activity Level Processing transactions $2,000,000 $2,200,000 Number of transactions 5,000,000 5,800,000 Issuing monthly statements 1,000,000 1,300,000 Number of statements 250,000 270,000 Issuing new credit cards 500,000 400,000 Number of new credit cards 100,000 110,000 Resolving billing disputes 90,000 100,000 Number of disputes 3,000 3,500 Total $3,590,000 $4,000,000 REQUIRED 1. Using budgeted values for costs and activity, calculate an ABC allocation rate for each activity. 2. Prepare an operating cost statement for Data Processors that compares the static budget, the flexible budget, and actual costs. 3. Calculate the spending variance for the cost of processing transactions. 4. Suppose the costs for processing transactions include some fixed and some variable costs, as shown here: Estimated Cost Actual Cost Fixed costs $1,000,000 $1,300,000 Variable costs 1,000,000 900,000 Total $2,000,000 $2,200,000 Based on the new information, calculate spending variances for the cost of processing transactions. 5. Discuss possible reasons for the variances calculated in Part 4.