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 ltens carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to L ogistics Solustions which pulls the item from storage, packs it. and ships it to the customer. The company usies a predetermind variable overthead rate based on direct labor hours In the most recent month, 135,000 items were shipped to customers using 5,000 direct labor-hours. The campany incurred a total of $14,750 in variable overhead costs According to the company's standards, 0,04 direct labor hours are resqui ired to fultfill an order for one item and the variable overhead rate is $3.00 per direct labor hour Required 1 What is the standard labor hours allowed (SH) to ship 135,000 tems to customers? rd variable overhead cost allowed (SH SR) to ship 135,000 Items to customers? 3. What is the variable owerhead spending varlance? 4 What is the variable overhead rate varkance and the variable overhead efficiency variance? (For requirements 3 and 4, indicate the offect of each variance by selecting "F" for fevorable, "U" for no effect fi.e., zero veriance) Input all omounts as positive values Do no unfevorable, and "None"fo no round intermediete caiculetions.) 1 Standard quanbty of lsbor hors alowed 2 Standrd vanable overhead cost alowod 3 Varable overhead spending vanance Vanable overhead rale vianance Vanable overhead effercy waarc

Explanation / Answer

STANDARD for 1 item STANDARD for 135000 item ACTUAL for 135000 items Hours Per Hour Cost Total Cost Hours Per Hour Cost Total Cost Hours Per Hour Cost Cost 0.04 3 0.12 5400 3 16200 5000 2.95 14750 1. Standard Labour Hours to ship 135000 items = 5400 Hours 2. Standard Variable Overhead Cost to ship 135000 items= $16,200 3. Variable Overheads Spending Variance= Actual hours worked x (Actual overhead rate - standard overhead rate) 5000*(2.95-3) -250 Favourable 4. Variable Overheads Rate Variance is also known as variable overheads spending variance= 250 Favourable 5. variable overheads efficiency variance=Standard overhead rate x (Actual hours - Standard hours) 3*(5000-5400) -1200 Favorable STANDARD for 1 item STANDARD for 4800 item ACTUAL for 4800 items Hours Per Hour Cost Total Cost Hours Per Hour Cost Total Cost Hours Per Hour Cost Cost 0.5 9.4 4.7 2400 9.4 22560 2350 10 23500 1. Standard Labour Hours to prepare 4800 meals = 2400 Hours 2. Standard Labour Cost to prepare 4800 meals= $22,560 3. Labour Spending Variance= Actual hours worked x (Actual rate - standard rate) 2350*(10-9.4) 1410 UnFavourable 4. Labour Rate Variance is also known as Labour spending variance= 1410 UnFavourable 5. labour efficiency variance=Standard rate x (Actual hours - Standard hours) 9.4*(2350-2400) -470 Favorable

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