**Logistics Solutions Case Study: Variable Overhead Variance Analysis****Company Overview:**Logistics Solutions provides order fulfillment services for dot.com merchants. The company operates warehouses for storing items, which are then packed and shipped to customers upon order receipt. A predetermined variable overhead rate based on direct labor-hours is employed for operations.**Recent Performance Data:**- **Monthly Orders:** 110,000 items shipped- **Direct Labor-Hours Used:** 3,500 hours- **Incurred Variable Overhead Costs:** $9,450- **Standard Requirements:** - **Direct Labor-Hours per Item:** 0.03 hours - **Variable Overhead Rate:** $2.75/hour**Analysis Objectives:**1. **Calculate Standard Labor-Hours Allowed (SH):** Determine the permitted labor-hours for shipping 110,000 items.2. **Determine Standard Variable Overhead Costs:** Compute the overhead costs using the formula $SH \times \text{SR}$.3. **Compute Variable Overhead Spending Variance.**4. **Identify Variable Overhead Rate and Efficiency Variances.****Results:**| Requirement Description | Result | Variance Type ||-----------------------------------------------------------|---------|---------------|| **1. Standard Quantity of Labor-Hours Allowed (SH):** | 3,300 | - || **2. Standard Variable Overhead Cost Allowed (SH × SR):** | $9,075 | - || **3. Variable Overhead Spending Variance** | $375 | Unfavorable (U) || **4. Variable Overhead Efficiency Variance** | - | - |**Graph/Diagram Explanation:**The table above provides an organized presentation of the variance analysis. Each row outlines one specific requirement:- **Standard Quantity of Labor-Hours Allowed:** Reflects the calculated hours (3,300) based on standards.- **Standard Variable Overhead Cost Allowed:** Shows expected costs ($9,075) considering the standard rates and hours.- **Variable Overhead Spending Variance:** Calculated difference between actual and expected costs, noted as unfavorable ($375).- **Variable Overhead Efficiency Variance:** Not applicable in this context.**Notes for Educational Understanding:**- **Spending Variance:** Occurs when the actual overhead costs deviate from the expected overhead costs.- **Efficiency Variance Analysis

Answer 1) Calculation of Standard Labor hours allowed to Ship 110,000 items Standard labor hours…

ogistics Solutions provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items arried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which ulls 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. n the most recent month, 110,000 items were shipped to customers using 3,500 direct labor-hours. The company incurred a total of $9,450 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 $2.75 per direct labor-hour. Required: 1. What is the standard labor-hours allowed (SH) to ship 110,000 items to customers? 2. What is the standard variable overhead cost allowed (SH x SR) to ship 110,000 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?

ogistics Solutions provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items arried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which ulls 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. n the most recent month, 110,000 items were shipped to customers using 3,500 direct labor-hours. The company incurred a total of $9,450 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 $2.75 per direct labor-hour. Required: 1. What is the standard labor-hours allowed (SH) to ship 110,000 items to customers? 2. What is the standard variable overhead cost allowed (SH x SR) to ship 110,000 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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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