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, 155,000 items were shipped to customers using 6,000 direct labor-hours. The company incurred a total of $17,400 in variable overhead costs. According to the company’s standards, 0.04 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.00 per direct labor-hour. Required: 1. According to the standards, what variable overhead cost should have been incurred to fill the orders for the 155,000 items? How much does this differ from the actual variable overhead cost? (Round labor-hours per item and overhead cost per hour to 2 decimal places.)

Answer 1

Answer:1.$18600 it differs from the the actual variable overhead cost by $1200($18600-$17400)

Explanation:

budgeted direct labour hrs (155,000units * 0.04)=6200hrs

variable overhead cost= 6200* $3 per hr=$18600

The results gives a favourable variance of $1200 compare to the actual variable overhead cost of $17400.