Question

LH lepo Chapter 10 Homework(E10-123) Exercise 10-3 Variable Overhead Variances (LO10-3) Logistics Solutions provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor hours points In the most recent month, 175,000 items were shipped to customers using 7.400 direct labor-hours. The company incurred a total of $24790 in variable overhead costs. According to the company's standards, 0.04 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.40 per direct labor hour Required: 1. What is the standard labor hours allowed (SH) to ship 175,000 items to customers? 2. What is the standard variable overhead cost allowed (SHSR) to ship 175,000 items to customers? 3. What is the variable overhead spending variance? 4. What is the variable overhead rate variance and the variable overhead efficiency variance? For requirements 3 and 4. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect Zero variance). Input all amounts as positive values. Do no round intermediate calculations.) 1 Standard quantity of labor hours allowed 2 Standard variable overhead cost owed 13 Variable overhead spending variance Variable overhead materace Varovecheadcancy variance

Answer 1

Answer:

1	Standard Quantity of labor allowed
	= 175,000 * 0.04
	= 7000
2	Standard variable oh cost allowed
	= 7000* 3.40
	= 23800
3	Voh spending variance = 23800 - 24790
	= 990 UnFavourable
4	Voh rate variance = (SR-AR) * AH
	= (3.40 - 24790/7400) * 7400
	= 370 Favourable
	Voh efficiency variance = (SH-AH) *SR
	= (7000 - 7400)*3.40
	= 1360 UnFavourable