Reference no: EM132516155

Point 1: Sahara Company provides customer help centre services for online merchants. The company maintains catalogues and service manuals for stock items carried by its online retail clients. When a client receives a product inquiry or service request from a customer, the request is forwarded to Sahara, which responds to the customer inquiry on behalf of the online retail client. The company uses a predetermined variable overhead rate based on direct labour- hours.

Point 2: In the most recent month, 35,000 inquiry requests were responded to and solutions provided to customers, using 5,700 direct labour-hours. The company incurred a total of $7,125 in variable overhead costs.

Point 3: According to the company's standards, 0.15 direct labour-hours are required to fulfill a service request for one customer and the variable overhead rate is $1.30 per direct labour-hour.

Required:

Question 1: What variable overhead cost should have been incurred to fill the service requests for the 35,000 items? How much does this differ from the actual variable overhead cost?

Question 2: Break down the difference computed in (1) above into a variable overhead spending variance and a variable overhead efficiency variance.