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, 165,000 items were shipped to customers using 6,800 direct labor-hours. The company incurred a total of $22,100 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 $3.30 per direct labor-hour. Required: 1. What is the standard labor-hours allowed (SH) to ship 165,000 items to customers? 2. What is the standard variable overhead cost allowed (SH x SR) to ship 165,000 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
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, 165,000 items were shipped to customers using 6,800 direct labor-hours. The company incurred a total of $22,100 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 $3.30 per direct labor-hour. Required: 1. What is the standard labor-hours allowed (SH) to ship 165,000 items to customers? 2. What is the standard variable overhead cost allowed (SH x SR) to ship 165,000 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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text: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, 165,000 items were shipped to customers using 6,800 direct labor-hours. The company incurred a total of
$22,100 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 $3.30 per direct labor-hour.
Required:
1. What is the standard labor-hours allowed (SH) to ship 165,000 items to customers?
2. What is the standard variable overhead cost allowed (SH x SR) to ship 165,000 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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Step 1: Define Budget
VIEWStep 2: 1) standard labor hours allowed to ship 165,000 items is calculated as follows-
VIEWStep 3: 2) Calculation of standard variable overhead cost for 165,000 items is as follow-s
VIEWStep 4: 3) variable overhead spending variance is calculated as follows-
VIEWStep 5: 4) Calculation of variable overhead rate and efficiency variance is as follows-
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