Question :
Logistics Solutions gives order fulfillment services for dot.com merchants. The company maintains warehouses that stock items carried by its dot.com clients. When a client gets 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 gets a predetermined variable overhead rate based on direct labor-hours.
In the most current month, 120,000 items were shipped to customers using 4,700 direct labor hours. The company incurred a total of $16,215 in variable overhead costs.
According to the company's standards, 0.04 direct labor-hours are needed to fulfill an order for one item and the variable overhead rate is $3.5 per direct labor-hour.
(a) What variable overhead cost could have been incurred to fill the orders for the 120,000 items?
Variable overhead cost $
(b)
How much does this differ from the actual variable overhead cost?
Total variable overhead variance $
Variable overhead rate variance $
Variable overhead efficiency variance