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, 195,000 items were shipped to customers using 8,600 direct labor-hours. The company incurred a total of $30,530 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 $3.60 per direct labor-hour. Required: 1. What is the standard labor-hours allowed (SH) to ship 195,000 items to customers? 2. What is the standard variable overhead cost allowed (SH x SR) to ship 195,000 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, 195,000 items were shipped to customers using 8,600 direct labor-hours. The company incurred a total of $30,530 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 $3.60 per direct labor-hour. Required: 1. What is the standard labor-hours allowed (SH) to ship 195,000 items to customers? 2. What is the standard variable overhead cost allowed (SH x SR) to ship 195,000 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
Problem 1Q
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Transcribed Image Text:# Logistics Solutions: Order Fulfillment Cost Analysis
**Overview:**
Logistics Solutions specializes in order fulfillment for dot.com merchants. It operates warehouses where items are stocked and shipped to customers. Orders are processed based on direct labor-hours, using a predetermined variable overhead rate.
**Recent Activity:**
- **Items Shipped:** 195,000 items
- **Direct Labor-Hours Used:** 8,600 hours
- **Total Variable Overhead Cost:** $30,530
**Standard Metrics:**
- **Direct Labor-Hours Required per Item:** 0.04 hours
- **Variable Overhead Rate:** $3.60 per direct labor-hour
### Analysis Requirements
1. **Standard Labor-Hours Allowed (SH):**
Calculate SH for shipping 195,000 items to determine standard labor efficiency.
2. **Standard Variable Overhead Cost:**
Determine the cost expectation using SH and the standard rate (SR).
3. **Variable Overhead Spending Variance:**
Analyze cost differences due to spending.
4. **Variable Overhead Rate and Efficiency Variances:**
Assess the variances to identify productivity and cost management effectiveness.
- **Spending Variance Indicator:** Favorable (F), Unfavorable (U), or None
- **Efficiency Variance Indicator:** Favorable (F), Unfavorable (U), or None
**Instructions:**
To complete requirements 3 and 4, input all amounts as positive values without rounding intermediate calculations.
### Calculation Table
| Description | Amount | Variance Indicator |
|-------------------------------------------|--------|--------------------|
| 1. Standard quantity of labor-hours allowed | | |
| 2. Standard variable overhead cost | | |
| 3. Variable overhead spending variance | | F/U/None |
| 4. Variable overhead rate variance | | F/U/None |
| 5. Variable overhead efficiency variance | | F/U/None |
Complete these calculations to derive insights into operational efficiency and cost management performance.
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