Spending and efficiency overhead variances, service sector. TimeSavers (TS) operatesa @

personal home meal delivery service. It has agreements with 20 restaurants to pick up and 1. Variable MOH spending deliver meals to customers who phone or fax in orders. TS is currently examining its over- variance, $3,580 U head costs for May 2010. Customers are charged $12 per delivery. The delivery driver is paid

$7 per delivery. TS receives a 10% commission on the meal costs that the restaurants charge the customers who use TS.

Variable overhead costs for May 2010 were budgeted at $2 per hour of home delivery time. Fixed overhead costs were budgeted at $28,800. The budgeted number of home deliveries in May 2010 was 9,600. Delivery time, the allocation base for variable and fixed overhead costs, is budgeted to he 0.80 hour per delivery.

Actual results for May 2010 were as follows:

REQUIRED 1. Compute spending and efficiency variances for TS’s variable and fixed overhead in May 2010. Comment on the results.
2. How might TS manage its variable overhead costs differently from the way it manages its fixed overhead costs? .LO1

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Variable overhead $17,008 Fixed overhead $33,120 Number of home deliveries 8,952 Hours of delivery time 6,714