Check r Logistics Solutions provides order fulfillment services for dot.com merc

Question

Check r 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, 115,000 items were shipped to customers using 3,800 direct labor-hours. The company incurred a total of $10.450 in variable overhead costs. According to the company's standards, 004 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $2.80 per direct labor-hour. Required: 1. What is the standard labor-hours allowed (SH) to ship 115,000 items to customers? 2. What is the standard variable overhead cost allowed (SH SR) to ship 115.000 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, indicete 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 no round intermediate colculations.) 1. |Standard quantity of labor hours allowed 2. Standard variable overhead cost allowed 3 Variable overhead spending variance

Explanation / Answer

Answer 1.

Standard labor-hours allowed = Standard labor-hours per unit * Number of units
Standard labor-hours allowed = 0.04 * 115,000
Standard labor-hours allowed = 4,600

Answer 2.

Standard Variable Overhead Cost allowed = Standard labor-hours allowed * Standard Variable Overhead rate
Standard Variable Overhead Cost allowed = 4,600 * $2.80
Standard Variable Overhead Cost allowed = $12,880

Answer 3.

Variable Overhead Spending Variance = Actual Variable Overhead Cost - Standard Variable Overhead Cost allowed
Variable Overhead Spending Variance = $10,450 - $12,880
Variable Overhead Spending Variance = $2,430 Favorable

Answer 4.

Variable Overhead Rate Variance = Actual Variable Overhead Cost - Actual labor-hours * Standard Variable Overhead rate
Variable Overhead Rate Variance = $10,450 - 3,800 * $2.80
Variable Overhead Rate Variance = $190 Favorable

Variable Overhead Efficiency Variance = Actual labor-hours * Standard Variable Overhead rate - Standard Variable Overhead Cost allowed
Variable Overhead Efficiency Variance = 3,800 * $2.80 - $12,880
Variable Overhead Efficiency Variance = $2,240 Favorable

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