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 its Variable and Fixed overhead on the basis of a 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.

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

Group of answer choices

1 customer / customer

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

1 cust. / cust.

I get it, it's 1 customer/customer

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

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

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

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

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

What is the difference between the Total Normal Variable Overhead and the Total Actual Variable Overhead (calculate Actual - Normal)?

Note: This is asking for the difference in JUST Variable Overhead, NOT the difference in total cost. Also, the two questions above DO ask about total cost, just to be as clear as possible.

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?

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

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

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

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

Answer rating: 100% (QA)

Standard Price of variable overheads as per question 11250900 125 I if direct labour hour is taken a... View the full answer