Problem
Logistics Solutions 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 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, 200,000 items were shipped to customers using 8,900 direct labor-hours. The company incurred a total of $32,040 in variable overhead costs.
According to the company's standards, 0.03 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.65 per direct labor-hour.
Task
1) What is the standard labor-hours allowed (SH) to ship 200,000 items to customers?
2) What is the standard variable overhead cost allowed (SH × SR) to ship 200,000 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?