Actual/Normal/Standard Costing

Fast Finance is a drive-in financial consulting business, where customers park in the parking lot and employees come by on roller-skates to give them financial advice.

For the month of January, Fast Finance estimates that they will receive 900 customers. The following table summarized their budgeted costs for January:

Standards

Direct Labor Cost 50 $ / hr

Total Variable Overhead Cost $11,250

Total Fixed Overhead Cost $19,800

Number of Customers 900

Total Direct Labor Hours 1,125 hrs

At the end of January, Fast Finance had incurred the following actual costs:

Actuals

Direct Labor Cost $48,000

Total Variable Overhead Cost $9,600

Total Fixed Overhead Cost $20,000

Number of Customers 960

Total Direct Labor Hours 960 hrs

Fast Finance uses a full-absorption, normal costing system, and allocates their Variable and Fixed overhead on the basis of number of customers. Fast Finance charges their customers a flat rate per session, and as a result, considers the 'units' for their costing system to be customers.

Q1

What is the Standard Amount (SA) for Variable Overhead (and Fixed Overhead, incidentally)?

1 customer / customer

1 unit / unit, where customers are the 'units'

1 cust. / cust.

I get it, it's 1 customer / customer

Q2

What is the Standard Price (SP) of Variable Overhead?

Q3

What is the Standard Price (SP) of Fixed Overhead?

Q4

What is the total cost of sales using full absorption,Normalcosting?

Note: Cost of Sales is effectively the COGS for a service company. So this is just asking for total Normal cost.

Q5

What is the total cost of sales using full absorption,Actualcosting?

Q6

What is the difference between the TotalNormalVariable Overhead (VOH) and the TotalActualVariable Overhead (VOH)?(calculate Actual - Normal)

Note: This is asking for the difference inJUSTVariable Overhead,NOTthe difference in total cost. Also the two questions above DO ask about total cost, just to be as clear as possible.

Q7

Suppose that Fast Finance is curious about their cost driver for Variable Overhead. What would be the Standard Price (SP) for Variable Overhead if they instead allocated Variable Overhead on the basis of Direct Labor Hours?

Q8

What would be the Standard Amount (SA) for Variable Overhead if, again, Fast Finance allocated Variable Overhead on the basis of Direct Labor Hours?

Q9

Again, if Fast Finance allocated Variable Overhead on the basis of Direct Labor Hours, what would be the difference between the TotalNormalVariable Overhead (VOH) and the TotalActualVariable Overhead (VOH)?(calculate Actual - Normal)

Note: Again, just the difference in Variable Overhead, not total costs.

Q10

Given your answer to the above questions, what do you think is 'right' driver for Variable Overhead: customers or direct labor hours?