Question

Variable Overhead Variances, Service Company Rostand Inc. operates a delivery service for over 70 restaurants. The corporation has a fleet of vehicles and has invested in a sophisticated, computerized communications system to coordinate its deliveries. Rostand has gathered the following actual data on last year's delivery operations: Deliveries made 38,600 Direct labor Actual variable overhead 31,000 direct labor hours @ $14.00 $157,700 Rostand employs a standard costing system. During the year, a variable overhead rate of $5.10 per hour was used. The labor standard requires 0.80 hour per delivery. Required: 1. Compute the standard hours allowed for actual deliveries made last year. direct labor hours 2. Compute the variable overhead spending and efficiency variances. Enter amounts as positive numbers and select Favorable or Unfavorable. Spending variance $ Favorable Unfavorable Efficiency variance $

Answer 1

Requirement 1-Standard hours

30880 Direct labor hours

Requirement 2

Spending variance =$ 212 Unfavorable

Efficiency variance= $ 612 Unfavorable

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Working

Variable Overhead Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$      1,57,488.00	-	$       1,57,700.00	)
	-212
	Variance		$                 212.00			Unfavourable-U

.

Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	30880	-	31000	)	x	$              5.10
	$             (612.00)
	Variance		$                 612.00			Unfavourable-U

.

Standard DATA for		38600	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Variable Overhead	( 0.8 Hour x 38600 Units)=30880 Hour	$                   5.10	$         157,488.00

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