Erie Company manufactures a small mp3 player called the Jogging Mate. The compan
ID: 2519287 • Letter: E
Question
Erie Company manufactures a small mp3 player called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate mp3 player are as follows:
During August, 9,555 hours of direct labor time were needed to make 19,500 units of the Jogging Mate. The direct labor cost totaled $56,375 for the month.
According to the standards, what direct labor cost should have been incurred to make 19,500 units of the Jogging Mate? By how much does this differ from the cost that was incurred? (Round Standard labor time per unit to 2 decimal places.)
Break down the difference in cost from (1) above into a labor rate variance and a labor efficiency variance. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). )
The budgeted variable manufacturing overhead rate is $4.5 per direct labor-hour. During August, the company incurred $47,775 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month. (Do not round intermediate calculations and round your final answers to nearest whole dollar. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
Erie Company manufactures a small mp3 player called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate mp3 player are as follows:
Explanation / Answer
1) According to the standards, what direct labor cost should have been incurred to make 19,500 units of the Jogging Mate? By how much does this differ from the cost that was incurred?
3725 U
2) Labour rate variance = (6*9555-56375) = 955 F
Labour efficiency variance = (8775-9555)*6 = 4680 U
3) Variable overhead rate variance = (4.5*9555-47775) = 4777.50 U
Variable overhead efficiency variance = (8775-9555)*4.5 = 3510 U
Number of units manufactured 19500 Standard labor time per unit 27 min Total standard hours of labor time allowed 8775 Standard direct labor rate per hour 6 Total standard direct labor cost 52650 Actual direct labor cost 56375 Standard direct labor cost 52650 Total variance—unfavorable3725 U
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