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, 140,000 items were shipped to customers using 5,300 direct labor-hours. The company incurred a total of $15,900 in variable overhead costs.

Answer 1

Predetermined overhead rate

= Variable overhead cost

Direct labour hours

= $15,900

5,300 hours

= $3 per direct labour hour

Step-by-step explanation:

Predetermined overhead rate equals total variable overhead cost divided by direct labour hours, which is $3 per direct labour hour.