Logistics Solutions provides order fullfilment services for dot.com merchants. T

Question

Logistics Solutions provides order fullfilment services for dot.com merchants. The company maintains warehouses that stock items carried by dot.com clients. When a client receives an order from a customer, the oder 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, 120,000 hours wer shipped to customers using 2,300 direct labor hours. The company inccurred a total of $7,360 in variable overhead costs.

According to the company's standards, 0.02 direct labor hours are required to fulfill an order for one item and the variable overhead rate is $3.25 per direct labor hour.

Lagsacs Sousons proves oder neent sevices tor dotcom merchants The conpany maintans Accoding to the company's standands 02 diect tabor-hours ane required to

Explanation / Answer

1 Number of items shipped 120000 Standard direct labor-hours per item 0.02 Total direct labor-hours allowed 2400 Standard variable overhead cost per hour 3.25 Total standard variable overhead cost 7800 Actual variable overhead cost 7360 Total standard variable overhead cost 7800 Total variable overhead variance 440 Favorable 2 Variable overhead rate variance = 7360-(2300*3.25)= $115 F Variable overhead efficiency variance = 3.25*(2300-2400)= $325 F

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