Logistics Solutions provides order fulfillment services for dot.com merchants. T
ID: 2471798 • Letter: L
Question
Logistics Solutions provides order fulfillment services for dot.com merchants. The company martans warehouses that stock items earned by its dotcom clients. When a client receives an order horn a customer, the outer is forwarded to logistics Solutions. which pulls the item from storage, packs it, and ships it to the customer. The company uses a predrtermined variable overhead late based on dree I Labor hous In the most recent month. 200.000 items were shipped to customers using 8,900 direct labor hours The company incurred a total of $32, 040 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 $3.65 per direct labor-hour. According to the standards what variable overhead cost should have been moaned to fill the orders for the 200, 000 items? How much does this differ from the actual variable overhead cost? (Indicate the effect of each variance by selecting "F" tor 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.) Break down the difference computed in (1) above into a variable overhead rate variance and a variable overhead efficiency variance (Indicate the effect of each variance by selecting "F" for favorable. "IT for unfavorable, and Hone" for no effect (i.e.. zero variance).)Explanation / Answer
SRSH SRAH ARAH
3.65 x 6,000 3.65 x 8,900 $32,040
=$21,900 =$32,485
SR=Standard Rate per Labor hr= $3.65
SH= Standard hrs required for actual production= 0.03 x 200,000=6,000 hrs
AH= Actual hr worked = 8,900 hrs
ARAH= Actual Labor Cost= $32,040
AR= Actual Rate per labor hr= $32,040/8,900=$3.60
According standard $21,900 to be incurred to fill the orders of 200,000 items
The difference is $21,900-$32,040=- $10,140 U
No of items shipped= 200,000
Std direct labor hrs per item= 0.03 hrs
Total direct labor hrs allowed= 6,000 hrs
Std variable overhead cost per hr= $3.65
Actual variable over head incurred=$32,040
Total std variable overhead cost =$21,900
Total Variable overahead variance= SRSH- ARAH=$21,900-$32,040=- $10,140 U
Variable overhead rate variance= SRAH-ARAH=$32,485-$32,040=$445 F
Variable overhead efficency variance= SRSH-SRAH=$21,900--$32,485=$10,585
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