Order Up, Inc., 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 Order Up, 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, 110,000 items were shipped to customers using 5,400 direct labor-hours. The company incurred a total of $18,630 in variable overhead costs.
According to the company’s standards, 0.05 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.50 per direct labor-hour.
Required:
1 a. According to the standards, what variable overhead cost should have been incurred to fill the orders for the 110,000 items? (Omit the "$" sign in your response.)
Total standard variable overhead cost $?
1 b. How much does this differ from the actual variable overhead cost? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input the amount as a positive value. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)
Spending variance $?
2. Break down the difference computed in (1) above into a variable overhead rate variance and a variable overhead efficiency variance. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)
Variable overhead rate variance $ ?
Variable overhead efficiency variance $?