Question

Logistic 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.

In the most recent month, 160,000 items were shipped to customers using 6500 direct labor-hours. The company incurred a total of $20,800 in variable overhead costs.

According to the company's standards, 0.03 direct labor-hours are required to fulfill an order for one item and the variable overhead is $3.25 per direct labor hour.

Required:

1) What is the standard labor-hours allowed (SH) to ship 160,000 items to customers?

2) What is the standard variable overhead cost allowed (SH x SR) to ship 160,000 items to customers?

3) What is the variable overhead spending variance?

4) What is the variable overhead rate variance and the variance overhead efficiency variance?

83 oints Logistics Solutions provides order fulfillment services for dot.com merchants. The carried by its dot.com clients. When a client receives an order from a customer, the pulls the item from storage, packs it, and ships it to the customer. The company use on direct labor-hours. eBook In the most recent month, 160,000 items were shipped to customers using 6.500 d $20,800 in variable overhead costs. According to the company's standards, 0.03 direct labor-hours are required to fulfill rate is $3.25 per direct labor-hour. Printe 1 Required: . What is the standard labor-hours allowed (SH) to ship 160,000 items to customers 2. What is the standard variable overhead cost allowed (SH SR) to ship 160.000 ite 3. What is the variable overhead spending variance? 4. What is the variable overhead rate variance and the variable overhead efficiency References (For requirements 3 and 4, indicate the effect of each variance by selecting "F"fon no effect (i.e., zero variance). Input all amounts as positive values. Do no round int 1. Standard quantity of labor-hours allowed 2. Standard variable overhead cost allowed 3. Variable overhead spending variance 223 Variable overhead rate variance 5 Variable overhead efficiency variance MA 9 A R

Answer 1

1	Standard quantity of labor-hours allowed = Number of items shipped * Standard direct labor hours per item = 160000 * 0.03	4800
2.	Standard variable overhead cost allowed = Standard quantity of labor-hours allowed * Standard variable overhead rate per direct labor hour = 4800 * 3.25	15600
3.	Variable overhead spending variance = Actual variable overhead cost - Standard variable overhead cost allowed = 20800 - 15600	5200	U
4.	Actual variable overhead rate = Actual variable overhead cost / Actual direct labor hours = 20800 / 6500	3.2
	Variable overhead rate variance = ( Actual rate - Standard rate ) * Actual hours = ( 3.2 - 3.25 ) * 6500	325	F
	Variable overhead efficiency variance = ( Actual hours - Standard hours ) * Standard rate = ( 6500 - 4800 ) * 3.25	5525	U