EXERCISE 10-3 Variable Overhead Variances LO10-3 Logistics Solutions provides order fulfillment services for dot.com merchants. The company main- tains 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. 120.000 items were shipped to customers using 2,300 direct labor- hours. The company incurred a total of 57.360 in variable overhead costs. According to the company's standards, 0.02 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.25 per direct labor-hour. Required: 1. What is the standard labor-hours allowed (SH) to ship 120.000 items to customers? 2. What is the standard variable overhead cost allowed (SH X SR) to ship 120,000 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? EXERCISE 10-4 Direct Labor and Variable Manufacturing Overhead Variances L010-2, L010-3 Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows: Standard Hours 18 minutes Standard Rate per Hour $17.00 Standard Cost $5.10 During August, 5,750 hours of direct labor time were needed to make 20,000 units of the Jogging Mate. The direct labor cost totaled $102.350 for the month. Required: 1. What is the standard labor-hours allowed (SH) to makes 20.000 Jogging Mates? 2. What is the standard labor cost allowed (SH X SR) to make 20,000 Jogging Mates? 3. What is the labor spending variance? 4. What is the labor rate variance and the labor efficiency variance? 5. The budgeted variable manufacturing overhead rate is S4 per direct labor-hour. During August, the company incurred $21,850 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month. 5 Working Backwards from Labor Variances L010-2