Answered

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, 120,000 items were shipped to customers using 2,300 direct labor-hours. The company incurred a total of $7,360 in variable overhead costs. According to the company’s standards, 0.02 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.25 per direct labor-hour. Required: 1. What is the standard labor-hours allowed (SH) to ship 120,000 items to customers? 2. What is the standard variable overhead cost allowed (SH × SR) to ship 120,000 items to customers? 3. What is the variable overhead spending variance? 4. What is the variable overhead rate variance and the variable overhead efficiency variance?

Answer :

akiran007

Answer:

1.  The standard labor-hours allowed (SH) 2400 direct labor Hours.

2. The standard variable overhead cost  $ 7800

3.  Variable overhead spending variance 115 fav

4. Variable overhead rate variance 115 fav

4. Variable overhead efficiency variance 95 Fav

Explanation:

1.  The standard labor-hours allowed (SH) to ship 120,000 items to customers

= 0.02 * 120,000= 2400 direct labor Hours.

2. The standard variable overhead cost allowed (SH × SR) to ship 120,000 items to customers=  2400 * $3.25= $ 7800

3.  Variable overhead spending variance= Actual Overhead Costs - AH* SR

        =7360- 2300 *3.25= 7360- 7475= 115 fav

4. Variable overhead rate variance =AH*Actual Variable Overhead Rate per Hour - AH* Standard Variable Overhead Rate per Hour

Variable overhead rate variance =2300* (7360/2300) - 2300* 3.25

Variable overhead rate variance =2300* 3.2 - 2300* 3.25

Variable overhead rate variance =7360-7475=115 fav

4. Variable overhead efficiency variance= AH* SR- SH*SR

       = 7705- 7800= 95 Fav

Other Questions