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    Flexible Budgets and Variance Analysis to Monitor Performance

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    Geos operates a delivery service for local restaurants, delivering call-in, to-go meals for restaurant customers. Variable overhead costs are budgeted at $3 per hour, and 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

    Geos uses flexible budgets and variance analysis to monitor performance.

    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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    Solution Summary

    The solution examines Geos flexible budgets and variance analysis to monitor performance.