Erie Company manufactures a mobile fitness device called the Jogging Mate. The c
ID: 2523859 • 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 30 minutes Standard Rate Standard per Hour $5.60 Cost $2.80 During August, 10,150 hours of direct labor time were needed to make 19,200 units of the Jogig Mate. The direct labor cost totaled $55,825 for the month Required 1. What is the standard labor-hours allowed (SH) to makes 19,200 Jogging Mates? 2. What is the standard labor cost allowed (SHx SR) to make 19,200 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 $4.30 per direct labor-hour. During August, the company incurred $46,690 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
1 Standard labor hours allowed=19200*(30/60)= 9600 2 Standard labor cost allowed=9600*5.6= $53760 3 Labor spending variance=55825-53760= $2065 U 4 Labor rate variance=55825-(10150*5.6)= $1015 F Labor efficiency variance=5.6*(10150-9600)= $3080 U 5 Variable overhead rate variance=46690-(10150*4.3)= $3045 U Variable overhead efficiency variance=4.3*(10150-9600)= $2365 U
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