Rostand Inc. operates a delivery service for over 70 restaurants. The corporation has a fleetof vehicles and has invested in a sophisticated, computerized communications system tocoordinate its deliveries. Rostand has gathered the following actual data on last year’s delivery operations:Deliveries made 38,600Direct labor 31,000 direct labor hours @ $14.00Actual variable overhead $157,700Rostand 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 Refer to the information for Rostand Inc. above.Required:1. Compute the standard hours allowed for actual deliveries made last year.2. Compute the variable overhead spending and efficiency variances.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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 31,000 direct labor hours @ $14.00
Actual variable
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
Refer to the information for Rostand Inc. above.
Required:
1. Compute the standard hours allowed for actual deliveries made last year.
2. Compute the variable overhead spending and efficiency variances.
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