Overhead variances, service sector. Meals on Wheels (MOW) operates a meal home-delivery service. It has agreements with 20 restaurants to pick up and deliver meals to customers who phone or fax orders to MOW. MOW allocates variable and fixed overhead costs on the basis of delivery time. MOW's owner, Josh Carter, obtains the following information for May 2009 overhead costs:

REQUIRED 1. Compute spending and efficiency variances for MOW’s variable overhead in May 2009.
2. Compute the spending variance and production-volume variance for MOW’s fixed overhead in May 2009?
3. Comment on MOW’s overhead variances and suggest how Josh Carter might manage MOW’s variable overhead differently from its fixed overhead costs.LO1

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Actual Static Meals on Wheels (May 2009) Results Budget Output units (number of deliveries) 8,800 10,000 Hours per delivery 0.70 Hours of delivery time 5,720 Variable overhead cost per hour of delivery time $ 1.50 Variable overhead costs $10,296 Fixed overhead costs $38,600 $35,000