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Inspection costs using units inspected = $98.79 + ($2.02 × 1,500) = $3,128.79
Inspection costs using inspection labor-hours = $3.89 + ($20.06 × 160) = $3,213.49
If Sharon uses inspection-labor-hours she will estimate inspection costs to be $3,213.49,
$84.70 ($3,213.49 ─ $3,128.79) higher than if she had used number of units inspected. If actual
costs equaled, say, $3,160, Sharon would conclude that Parker has performed efficiently in its
inspection activity because actual inspection costs would be lower than budgeted amounts. In
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