Logistics Solutions provides order fulfillment services for dot.com merchants. T

Question

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, 165,000 items were shipped to customers using 6,800 direct labor-hours. The company incurred a total of $22,100 in variable overhead costs. According to the company's standards, 0.04 direct labor-hours are required to fulfill an order for one item Required 1. According to the standards, what variable overhead cost should have been incurred to fill the orders for the 165,000 items? How much does this differ from the actual variable overhead cost? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round labor-hours per item and overhead cost per hour to 2 decimal places.) Number of items shipped Standard direct labor-hours per item Total direct labor-hours allowed Standard variable overhead cost per hour Total standard variable overhead cost Actual variable overhead cost incurred Total standard variable overhead cost Total variable overhead variance

Explanation / Answer

Statement showing computations Particulars Amount No of items Shipped         165,000.00 Standard Labour hour per item                      0.04 Total DL hours allowed              6,600.00 Standard VC coct per hour                      3.30 Total Standard VO cost            21,780.00 ActualVariable overhead Cost            22,100.00 Total Standard VO cost            21,780.00 Total VO variance 320 U Particulars Standard Actual Hours Rate amount Hours Rate amount Variable Overhead              6,600.00                      3.30            21,780.00              6,800.00                  3.2500            22,100.00 VORV = (SR-AR)AH VORV = (3.30 - 3.25)6,800 VORV = 340 F VOEV = (SH-AH)SR VOEV = (6,600 - 6,800)3.30 VOEV = 660 U `

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