Saturday, August 17, 2013

Order Up, Inc., provides order fulfillment services for dot.com merchants

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, 140,000 items were shipped to customers using 5,800 direct labor-hours. The company incurred a total of $15,950 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 $2.80 per direct labor-hour.



Required:

1a.

According to the standards, what variable overhead cost should have been incurred to fill the orders for the 140,000 items? (Omit the \"$\" sign in your response.)

1b.

How much does this differ from the actual variable overhead cost? (Input the amount as a positive value. Leave no cells blank - be certain to enter \"0\" wherever required. Indicate the effect of each variance by selecting \"F\" for favorable, \"U\" for unfavorable, and \"None\" for no effect (i.e., zero variance). Omit the \"$\" sign in your response.)

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. Input all amounts as positive values. Leave no cells blank - be certain to enter \"0\" wherever required. Indicate the effect of each variance by selecting \"F\" for favorable, \"U\" for unfavorable, and \"None\" for no effect (i.e., zero variance). Omit the \"$\" sign in your response.)



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