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

Question

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.

In the most recent month, 185,000 items were shipped to customers using 8,000 direct labor-hours. The company incurred a total of $27,600 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 $3.50 per direct labor-hour.

Required:

1. What is the standard labor-hours allowed (SH) to ship 185,000 items to customers?

2. What is the standard variable overhead cost allowed (SH × SR) to ship 185,000 items to customers?

3. What is the variable overhead spending variance?

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 tem from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor-hours. 6 points In the most recent month, 185,000 items were shipped to customers using 8,000 direct labor-hours. The company incurred a total of $27,600 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 $3.50 per direct labor-hour. eBook Required: 1. What is the standard labor-hours allowed (SH) to ship 185,00O items to customers? 2. What is the standard varlable overhead cost allowed (SH SR) to ship 185,000 tems to customers? 3. What is the variable overhead spending variance? 4. What is the variable overhead rate varlance and the variable overhead efficiency variance? Hint Print (For requlrements 3 and 4, indicate the effect of each variance by selecting "F for favorable, "U" for unfavorable, and "None" for no effect (.e, zero variance). Input all amounts as positive values. Do no round intermedlate calculations.) References 1. Standard quantity of labor-hours allowed 2. 3. Variable overhead spending variance 4. Variable overhead rate variance Standard variable overhead cost allowed Variable overhead efficiency variance

Explanation / Answer

Actual output: 185000 units Actual labour hour: 8000 DLH Actual variable OH incurred: $ 27600 Actual variable OH rate pere houor (27600/8000) = $ 3.45 per hour Std hours allowed per unit: 0.04 DLH per unit Std hours allowed for actual output (185000*0.04)= 7400 DLH Std Ohh rate per hour: $ 3.50 per hour Std variable OH cost for actuall output: 7400 hours*3.50 = $25900 Variable OH spending variance: Std oh cost for actual output-Actual oh cost incurred 25900 -27600 =1700 Unfav Variable OH rate variance: Actual DLH (Std rate-Actual rate) 8000 (3.50-3.45)= $ 400 Fav Variable Efficiency Variance: Std rate (Std hours-Actual hours) 3.50 ( 7400-8000) = $2100 Unfav

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