Variable Overhead Variances, Service Company Rostand Inc. operates a delivery se
ID: 2545777 • Letter: V
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:
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.
Deliveries made 38,600 Direct labor 31,000 direct labor hours @ $14.00 Actual variable overhead $157,700 Required: 1. Compute the standard hours allowed for actual deliveries made last year. direct labor hours 2. Compute the variable overhead spending and efficiency variances. Spending variance$ Efficiency variance $Explanation / Answer
Req 1: Standard hour required per unit of output: 0.8 hour per delivery Actual Output: 38,600 deliveries Standard hours required for actual output (38600 deliveries @0.80 hour): 30,880 hours Req 2: Std rate per hour: $ 5.10 per hour Actual hours wroked: 31,000 hours Actual OH rate per hour (157700/31,000) = $5.087 per hour Variable Spending Vraiance: Actual Hours (Std rate per hour - Actual rate per hour) 31000 hours (5.10 - 5.087)= $ 400 favorable Variable Efficiency Variance: Std rate per hour (Std hours-Actual hours) 5.10 (30,880 -31000) = $612 unfavorable
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