Knee-Jerk Industries Operates a Delivery Service for Local Restaurants, Delivering

question 56

Essay

Knee-Jerk Industries operates a delivery service for local restaurants, delivering call-in, to-go meals for restaurant customers. Variable overhead costs are applied at the budgeted rate of $3 per driving hour. The typical roundtrip takes a driver 45 minutes to complete. Actual results for March follow.
Number of roundtrips run: 1,560
Hours of delivery time: 1,250
Variable overhead cost incurred: $3,450
Knee-Jerk uses flexible budgets and variance analysis to monitor performance.
Required:
A. Prepare a flexible-budget performance report that shows (1) actual variable overhead, (2) the amount of variable overhead that should have been incurred for the number of roundtrips taken, and (3) the variance between these amounts.
B. Compute the company's variable-overhead spending and efficiency variances.
C. Compare the variances that you computed in requirements "A" and "B," and comment on your findings.

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Definitions:

Pension Fund

A pool of assets forming a retirement plan for employees, in which funds are invested on behalf of members to generate future benefits.

Financial Knowledge

Understanding of financial principles, markets, and instruments, crucial for making informed personal finance and investment decisions.

Investment Decisions

Choices made by individuals or entities in allocating resources or capital to opportunities expected to generate returns or growth.

Downsizing

A business strategy involving the reduction of a company's workforce to improve its efficiency and reduce costs.