Reference no: EM132529718

Logistics Solutions provides order fulfillment services for dot-com merchants. 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 $7,360 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.

Question 1: Determine the spending variance for variable overhead for the month and whether it was favorable (F) or unfavorable (U).

Question 2: Break down the spending variance above into a variable overhead rate variance and a variable overhead efficiency variance and whether each was favorable (F) or unfavorable (U).