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Chalmet, Inc., operates a delivery service for over 70 restaurants. Chalmet has a fleet of vehicles and has invested in a sophisticated computerized communications system to coordinate its deliveries. Chalmet has gathered the following data on last year's operations:
a. Deliveries made: 73,000b. Direct labor: 52,000 delivery hours at $8c. Actual fixed overhead: $710,000d. Actual variable overhead: $160,000
Chalmet employs a standard costing system. During the year, the following rates were used: standard fixed overhead rate, $14 per delivery hour; standard variable overhead rate, $3.00 per hour. The labor standard requires 0.75 hour per delivery. (These rates were based on a standard normal volume of 50,000 delivery hours.)
Required
1. Compute the variable overhead spending and efficiency variances.
2. Compute the fixed overhead spending and volume variances.
Discuss when it is appropriate to use the t-based confidence interval for m. Using Table A.4 (page 792), find t.100, t.025, and t.001 based on 11 degrees of freedom. Also, find these t points based on 6 degrees of freedom.
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