Question
If you cannot see the image I uploaded go here - https://imageshack.us/scaled/large/835/q33.png
Erie Company manufactures a small CD player called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate CD player are as follows: During August. 8,420 hours of direct labor time were needed to make 19,200 units of the Jogging Mate. The direct labor cost totaled $51,362 for the month. What direct labor cost should have been incurred to make 19,200 units of the Jogging Mate? (Omit the "$" sign in your response.) By how much does this differ from the cost that was incurred? (Indicate the effect of the variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Omit the "$" sign in your response.) Break down the difference in cost from Requirement 1 above into a labor rate variance and a labor efficiency variance (Indicate the effect of the variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no (i.e., zero variance). Input all amounts as positive values. Omit the "$" sign in your response.) The budgeted variable manufacturing overhead rate is $4.5 per direct labor-hour. During August, the company incurred S45,468 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month (Indicate the effect of the variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Round your answers to the nearest whole dollar. Omit the "$" sign in your response.)
Explanation / Answer
Requirement 1
a)Standard Direct Labor Cost = 2.48*19200 = $47,616
b) Total variance = 51362-47616 = $3746 unfavorable
Requirement 2
Labor Rate Variance = 6.20*8420-51362 = $842 favorable
Labor Efficiency Variance = (7680-8420)*6.20 =$4588 unfavorable
Requirement 3
Variable Overhead Rate Variance = 4.5*8420-45468 = $7578 unfavorable
Variable Overhead Efficiency Variance = (7680-8420)*4.50=$3330 unfavorable
