Exercise 10-3 (Algo) 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. In the most recent month, 130,000 items were shipped to customers using 4,700 direct labor-hours. The company incurred a total of $13,630 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 rate is $2.95 per direct labor-hour. Required: 1. What is the standard labor-hours allowed (SH) to ship 130,000 items to customers? 2. What is the standard variable overhead cost allowed (SH x SR) to ship 130,000 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 (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.) 1. Standard quantity of labor-hours allowed 2. Standard variable overhead cost allowed 3. Variable overhead spending variance 4. Variable overhead rate variance 4. Variable overhead efficiency variance
Exercise 10-3 (Algo) 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. In the most recent month, 130,000 items were shipped to customers using 4,700 direct labor-hours. The company incurred a total of $13,630 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 rate is $2.95 per direct labor-hour. Required: 1. What is the standard labor-hours allowed (SH) to ship 130,000 items to customers? 2. What is the standard variable overhead cost allowed (SH x SR) to ship 130,000 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 (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.) 1. Standard quantity of labor-hours allowed 2. Standard variable overhead cost allowed 3. Variable overhead spending variance 4. Variable overhead rate variance 4. Variable overhead efficiency variance
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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![Exercise 10-3 (Algo) 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.
In the most recent month, 130,000 items were shipped to customers using 4,700 direct labor-hours. The company incurred a total of
$13,630 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
rate is $2.95 per direct labor-hour.
Required:
1. What is the standard labor-hours allowed (SH) to ship 130,000 items to customers?
2. What is the standard variable overhead cost allowed (SH x SR) to ship 130,000 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 (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)
1. Standard quantity of labor-hours allowed
2. Standard variable overhead cost allowed
3. Variable overhead spending variance
4. Variable overhead rate variance
4. Variable overhead efficiency variance](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe85a3215-93b5-4875-84d6-f01dbd791952%2Fe6cfb580-b3e0-4374-9dd8-a0ee5f43150a%2Fa8svqer_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 10-3 (Algo) 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.
In the most recent month, 130,000 items were shipped to customers using 4,700 direct labor-hours. The company incurred a total of
$13,630 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
rate is $2.95 per direct labor-hour.
Required:
1. What is the standard labor-hours allowed (SH) to ship 130,000 items to customers?
2. What is the standard variable overhead cost allowed (SH x SR) to ship 130,000 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 (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)
1. Standard quantity of labor-hours allowed
2. Standard variable overhead cost allowed
3. Variable overhead spending variance
4. Variable overhead rate variance
4. Variable overhead efficiency variance
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