Claims Management Inc. provides claims processing services to several large health insurance providers. Customers who are covered by health insurance provided by one of Claims Management's partners submit their claims for health and dental services along with related documentation, and the employees at Claims Management compare their claims to the details of their benefit plans and calculate the value of the benefits owed. The company uses a predetermined variable overhead rate based on direct labour-hours. In the month of September, 15,000 claims were processed using 4,500 direct labour-hours. The company incurred a total of $4,950 in variable overhead costs. According to the company's standards, 0.25 direct labour-hours are required to process a claim, and the variable overhead rate is $1.20 per direct labour-hour. Required. 1-a. What variable overhead cost should have been incurred to process the 15,000 claims? Standard variable overhead cost 1-b. How much does this differ from the actual variable overhead cost? (Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
Total variable overhead variance
2. Break down the difference computed in requirement 1-b above into a variable overhead spending variance and a variable overhead
efficiency variance. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no
effect (i.e., zero variance). Do not round intermediate calculations.)
Variable overhead spending variance
Variable overhead efficiency variance
Transcribed Image Text:Total variable overhead variance 2. Break down the difference computed in requirement 1-b above into a variable overhead spending variance and a variable overhead efficiency variance. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance). Do not round intermediate calculations.) Variable overhead spending variance Variable overhead efficiency variance
Claims Management Inc. provides claims processing services to several large health insurance providers. Customers who are covered
by health insurance provided by one of Claims Management's partners submit their claims for health and dental services along with
related documentation, and the employees at Claims Management compare their claims to the details of their benefit plans and
calculate the value of the benefits owed. The company uses a predetermined variable overhead rate based on direct labour-hours.
In the month of September, 15,000 claims were processed using 4,500 direct labour-hours. The company incurred a total of $4,950 in
variable overhead costs.
According to the company's standards, 0.25 direct labour-hours are required to process a claim, and the variable overhead rate is
$1.20 per direct labour-hour.
Required.
1-a. What variable overhead cost should have been incurred to process the 15,000 claims?
Standard variable overhead cost
1-b. How much does this differ from the actual variable overhead cost? (Indicate the effect of variance by selecting "F" for
favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
Transcribed Image Text:Claims Management Inc. provides claims processing services to several large health insurance providers. Customers who are covered by health insurance provided by one of Claims Management's partners submit their claims for health and dental services along with related documentation, and the employees at Claims Management compare their claims to the details of their benefit plans and calculate the value of the benefits owed. The company uses a predetermined variable overhead rate based on direct labour-hours. In the month of September, 15,000 claims were processed using 4,500 direct labour-hours. The company incurred a total of $4,950 in variable overhead costs. According to the company's standards, 0.25 direct labour-hours are required to process a claim, and the variable overhead rate is $1.20 per direct labour-hour. Required. 1-a. What variable overhead cost should have been incurred to process the 15,000 claims? Standard variable overhead cost 1-b. How much does this differ from the actual variable overhead cost? (Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Hospital Billing and Reimbursement
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education