FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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# Logistics Solutions: Order Fulfillment Cost Analysis

**Overview:**
Logistics Solutions specializes in order fulfillment for dot.com merchants. It operates warehouses where items are stocked and shipped to customers. Orders are processed based on direct labor-hours, using a predetermined variable overhead rate.

**Recent Activity:**
- **Items Shipped:** 195,000 items
- **Direct Labor-Hours Used:** 8,600 hours
- **Total Variable Overhead Cost:** $30,530

**Standard Metrics:**
- **Direct Labor-Hours Required per Item:** 0.04 hours
- **Variable Overhead Rate:** $3.60 per direct labor-hour

### Analysis Requirements

1. **Standard Labor-Hours Allowed (SH):** 
   Calculate SH for shipping 195,000 items to determine standard labor efficiency.
   
2. **Standard Variable Overhead Cost:** 
   Determine the cost expectation using SH and the standard rate (SR).

3. **Variable Overhead Spending Variance:** 
   Analyze cost differences due to spending.

4. **Variable Overhead Rate and Efficiency Variances:** 
   Assess the variances to identify productivity and cost management effectiveness.
   
   - **Spending Variance Indicator:** Favorable (F), Unfavorable (U), or None
   - **Efficiency Variance Indicator:** Favorable (F), Unfavorable (U), or None
   
**Instructions:**
To complete requirements 3 and 4, input all amounts as positive values without rounding intermediate calculations.

### Calculation Table

| Description                               | Amount | Variance Indicator |
|-------------------------------------------|--------|--------------------|
| 1. Standard quantity of labor-hours allowed |        |                    |
| 2. Standard variable overhead cost        |        |                    |
| 3. Variable overhead spending variance    |        | F/U/None           |
| 4. Variable overhead rate variance        |        | F/U/None           |
| 5. Variable overhead efficiency variance  |        | F/U/None           |

Complete these calculations to derive insights into operational efficiency and cost management performance.
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Transcribed Image Text:# Logistics Solutions: Order Fulfillment Cost Analysis **Overview:** Logistics Solutions specializes in order fulfillment for dot.com merchants. It operates warehouses where items are stocked and shipped to customers. Orders are processed based on direct labor-hours, using a predetermined variable overhead rate. **Recent Activity:** - **Items Shipped:** 195,000 items - **Direct Labor-Hours Used:** 8,600 hours - **Total Variable Overhead Cost:** $30,530 **Standard Metrics:** - **Direct Labor-Hours Required per Item:** 0.04 hours - **Variable Overhead Rate:** $3.60 per direct labor-hour ### Analysis Requirements 1. **Standard Labor-Hours Allowed (SH):** Calculate SH for shipping 195,000 items to determine standard labor efficiency. 2. **Standard Variable Overhead Cost:** Determine the cost expectation using SH and the standard rate (SR). 3. **Variable Overhead Spending Variance:** Analyze cost differences due to spending. 4. **Variable Overhead Rate and Efficiency Variances:** Assess the variances to identify productivity and cost management effectiveness. - **Spending Variance Indicator:** Favorable (F), Unfavorable (U), or None - **Efficiency Variance Indicator:** Favorable (F), Unfavorable (U), or None **Instructions:** To complete requirements 3 and 4, input all amounts as positive values without rounding intermediate calculations. ### Calculation Table | Description | Amount | Variance Indicator | |-------------------------------------------|--------|--------------------| | 1. Standard quantity of labor-hours allowed | | | | 2. Standard variable overhead cost | | | | 3. Variable overhead spending variance | | F/U/None | | 4. Variable overhead rate variance | | F/U/None | | 5. Variable overhead efficiency variance | | F/U/None | Complete these calculations to derive insights into operational efficiency and cost management performance.
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