Question

Logistics Solutions provides order fulfillment services for dot merchants. The company maintains warehouses that stock items carried by its dot 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, 160000 items were shipped to customers using 6,500 direct labor-hours. The company incurred a total of $20,800 in variable overhead costs. According to the company's standards, 0.03 direct lab0Fhours are required to fulfill an order for one item and the variable overhead

Required:
a. What is the Standard labor-hours allowed (SHI to ship 160,000 terms to customers?
b. What is the standard variable overhead cost allowed (SH SR) to ship 160,000 items to customers?
c. What is the variable overhead spending variance?
4. What is the variable overhead rate variance and the variable Overhead efficiency variance?

Answer 1

Answer: See explanation

Step-by-step explanation:

a. What is the Standard labor-hours allowed (SHI to ship 160,000 terms to customers?

Actual output = 160,000 items

Standard labour hour per time = 0.03 per time

Standard labor hour allowed = 160,000 × 0.03 = 4800 hours

b. What is the standard variable overhead cost allowed (SH SR) to ship 160,000 items to customers?

Standard variable overhead rate per hour = $3.25

Standard variable overhead cost allowed = 4800 × $3.25 = $15600

c. What is the variable overhead spending variance?

= $15600 - $20800

= $5200 Unfavorable

d. What is the variable overhead rate variance and the variable Overhead efficiency variance

Variable overhead rate variance:

= (Actual hours × Standard rate per hour ) - Actual variable overhead

= (6500 hours × 3.25) - $20800

= $21125 - $20800

= $325 F

Variable overhead efficiency variance:

= $3.25 (4800 - 6500)

= $3.25 (-1700)

= $5525 Unfavorable