Erie Company manufactures a mobile fitness device called the Jogging Mate. The c
ID: 2516607 • Letter: E
Question
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 27minutes Standard Rate Standard per Hour $5.60 Cost $2.52 During August, 9,245 hours of direct labor time were needed to make 19,300 units of the Jogging Mate. The direct labor cost totaled $50,848 for the month Required 1. What is the standard labor-hours allowed (SH) to makes 19,300 Jogging Mates? 2. What is the standard labor cost allowed (SHx SR) to make 19,300 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 $4.50 per direct labor-hour. During August, the company incurred $48,074 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month. (For requirements 3 through 5, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" . for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.) 1. Standard labor-hours allowed 2. Standard labor cost allowed 3. Labor spending variance 4. Labor rate variance Labor efficiency variance 5. Variable overhead rate variance iable overhead efficiency varianceExplanation / Answer
Answer for 1)
Standard hours allowed:
no. Of units produced×timed allowed/60minutes
=19300units×27 minutes/60minutes
=8685 hours.
Answer for 2)
Standard labour cost:STD. Hours×std. Rate per hour
=8685 hours×$5.6=$48636
Answer for 3)
Labour spending variance:
STD. Cost of labour -Actual cost
$48636-$50848=$2212 unfavorable
Answer for 4)
Labour rate variance:
(STD. Rate - actual rate)×actual hours
($5.6-($50848/9245 hours))×9245 hours
($5.6-$5.5[approx.])×9245 hours=$924.5
Labour efficiency variance:
(STD. Hours-actual hours)×std rate
(8685 hours-9245 hours)×$5.6=$3136
Answer for 5)
Variable overhead rate Variance:
(STD. Rate- actual rate)×actual hours
($4.5-($48074/9245hours))×9245hours=$6471.5
Variable overhead efficiency variance:
(STD. Hours-actual hours)×std. Rate
(8685 hours-9245 hours)×$4.5=$2520
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