Logistics Solutions provides order fulfillment services for dotcom merchants. The company maintains warehouses that stock items carried by its dotcom 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, 205,000 items were shipped to customers using 9,200 direct labor-hours. The company incurred a total of $33,580 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 $3.70 per direct labor-hour. Required: 1. What is the standard labor-hours allowed (SH) to ship 205,000 items to customers? 2. What is the standard variable overhead cost allowed (SH × SR) to ship 205,000 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?
Logistics Solutions provides order fulfillment services for dotcom merchants. The company maintains warehouses that stock items carried by its dotcom 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
In the most recent month, 205,000 items were shipped to customers using 9,200 direct labor-hours. The company incurred a total of $33,580 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 $3.70 per direct labor-hour.
Required:
1. What is the standard labor-hours allowed (SH) to ship 205,000 items to customers?
2. What is the standard variable overhead cost allowed (SH × SR) to ship 205,000 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?
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