Heather's Horse Spa (HHS) is an establishment that boards, trains, and pampers horses while their owners…

Heather’s Horse Spa is a place that boarders.
Trains and treats horses, while owners are away on vacation.
Heather describes her service as an “enchanting holiday experience.”
Your horse can stay with you while on vacation. Shampoos and feed for horses
Ribbons, other supplies and variable indirect cost are all considered.
There are therefore no material directs in the
Vacation service. Additional overheads, including indirect labor.
Fixed depreciation and advertising Both variable
Fixed overhead and a fixed allowance are allotted to every horse guest-week that uses the
Allocation is based on the weight of the horse.

HHS budgeted August 2015 amounts as:

Horse guest-weeks : 40

Average weight per horse: 500kg

Fixed overhead cost for each kilogram of horse $0.4/kg

Fixed overhead rate of $2.75/kg

The actual results of Augest 2015 were as follows:

Horse Guest Weeks 38

Average weight per horse: 525kg

Actual variable overhead: $7500

Average fixed overhead is $50000


1. Determine the variables overhead and efficiency.
Variations and how they indicate whether one is favorable (F), or not

2. Find the production-volume and fixed overhead costs.
These are called variances. They indicate whether one is favorable (F), or not.

3. Explain the variance in variable overhead rates. How can you explain the variance in variable overhead rates?
It could be caused by many factors.

4. How could variable overhead have occurred?
Variation in efficiency

5. How could fixed overhead be fixed if it is in fact fixed?
overhead rate variance occur?

6. Is there a reason for the fixed overhead production-volume variation?
It is what does it signify? Which negative consequences could it have?
The production volume variance

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