=+12-25 K Overhead variances, service sector OBJECTIVES 3, 4, 8 Mobile Meals operates a meal home-delivery service. It has agreements with 20 restaurants to pick up and deliver meals to customers who telephone or fax orders to Mobile Meals. Mobile Meals allocates variable and fixed overhead costs on the basis of delivery time. Mobile Meals’s owner, Josh Carter, obtains the following information for May 2015 overhead costs:

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7 A B C Mobile Meals (May 2015)

Actual results Static budget Output units (number of deliveries) 8 800 10 000 yreviled rep sruoH 07.0 emit yreviled fo sruoH 0275 Variable overhead cost per hour of delivery time 1.50 stsoc daehrevo elbairaV 69201$

stsoc daehrevo dexiF 00053$00683$

$

Required 1 Calculate spending and efficiency variances for Mobile Meals’s variable overhead in May 2015.

2 Calculate the spending variance and production-volume variance for Mobile Meals’s fixed overhead in May 2015.

3 Comment on Mobile Meals’s overhead variances and suggest how Josh Carter might manage this variable overhead differently from the fixed overhead costs.