Spending and efficiency overhead variances, distribution. Speciality Delivery Service (SDS) @

operates a parcel delivery service. In 2010 it charged retail companies and mail-order catalogue | yariabje oH spending companies $18 per delivery. Delivery drivers in 2010 were contracted at $6.00 per delivery. Vari- ariance, $2,880 U able delivery overhead for September 2010 was budgeted at $2.40 per hour of delivery time.

Budgeted fixed delivery overhead in September 2010 was $144,000. SDS budgeted 100,000 deliveries for September 2010. Delivery time, the allocation base for variable and fixed overhead costs, is budgeted to be 0.25 hours per delivery. SDS’s costing system has one direct-cost category (delivery driver payments) and two overhead categories—variable delivery over- _freyibie Budgets, Variances, head and fixed delivery overhead.

REQUIRED 1. Compute the spending and efficiency variances for SDS’s variable delivery overhead costs in September 2010. Compute the spending and production-volume variances for SDS’s fixed delivery overhead costs in September 2010. Comment on the results.
2. What problems might SDS face in managing

(a) its direct costs,

(b) its variable delivery overhead costs, and

(c) its fixed delivery overhead costs?
LO1

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Actual results for September 2010 were as follows: Variable delivery overhead Fixed delivery overhead Number of deliveries Hours of delivery time $ 72,000 $154,080 96,000 28,800