What direct labor cost should have been incurred to prepare 4,000 meals? How muc
ID: 2460529 • Letter: W
Question
What direct labor cost should have been incurred to prepare 4,000 meals? How much does this differ from the actual direct labor cost? 2. Break down the difference computed in (I) above into a for rate variance and a labor efficiency variance. Logistics solutions provide order fulfillment services for dot.com merchants. The company maintains warehouse 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. 120,000 items were shipped to customers using 2,300 direct labor hours. The company incurred a total of $7,360 in variable overheads costs. Hours the company incurred a total of $ 7,360 in variables overheads costs. According to the company standars 0.02 direct labor hours are required to fulfil an order for one item and the variable overhead rate is $3.25 per direct labor-hourExplanation / Answer
Answer 1
Total standard variable overhead cost=>
120000 items * 0.02 direct labour hours => 2400 std hrs * 3.25 per direct labour hours
Total standard variable overhead cost=> $7800
Actual variable overhead cost=> $7360
Total variable overhead variance => $ 440 Favourable
Answer 2
Actual rate => 7360 /2300 => 3.2
Actual Hours of Input, at theActual Rate => (AH * AR) => 2300 * 3.2 => $7360
Actual Hours of Input, at the Standard Rate => (AH * SR) => 2300 * 3.25 => $7475
Standard Hours Allowed for Actual Output,at the Standard Rate => (SH * SR) => 2400 * 3.25 => $7800
Variable Overhead spending variance => 7360 - 7475 => $115 Favourable
Variable Overhead effeciency variance => 7475 - 7800 => $325 Favourable
ie Total variable overhead variance => $115 + $325 => $440 Favourable
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