Problem
NSF Lube performed 465,200 oil changes last year. It had budgeted 436,000 oil changes, averaging 12 minutes each.
Standard variable labor and support costs per oil change were as follows:
Direct oil specialist services: 12 minutes at $28 per hour $ 5.60
Variable support staff and overhead: 8.0 minutes at $18 per hour 2.4
Fixed overhead costs: Annual budget $1,040,000
Fixed overhead is applied at the rate of $4.40 per oil change.
Direct oil specialist services: 465,200 changes averaging 15 minutes at $30 per hour $ 3,489,000
Variable support staff and overhead: 0.16 labor-hours at $16 per hour × 465,200 changes 1,190,912
Fixed overhead 1,500,000
a. Prepare a cost variance analysis for each variable cost for last year.
b. Prepare a fixed overhead cost variance analysis.