4 Erie Company manufactures a mobile fitness device called the Jogging Mate. The

Question

4 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 3e minutes Standard Rate per Hour standard Cost $2.90 points 55.80 During August, 10,180 hours of direct labor time were needed to make 19,100 units of the Jogging Mate. The direct labor cost totaled $58.026 for the month. Required 1. What is the standard labor-hours allowed (SH) to makes 19,100 Jogging Mates? 2. What is the standard labor cost allowed (SH SR) to make 19,100 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 $4.10 per direct labor-hour. During August, the company incurred $50,900 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month. (For requlrements 3 through 5, Indicate the effect of each verlence by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (1.e., zero varlence). Input all amounts as posltive values. Do no round Intermedlete calculatlons.) Answer is complete but not entirely correct. 9.550 55.390 Standard labor-hours allowed Standard labor cost allowed Labor spending variance Labor rate varianoe Labor efficiency variance Variable overhead rate variance Variable overhead efficiency variance 2. 3 2636 U 3.654 U 5

Explanation / Answer

Question 4

Part 4 --- Labor Rate/Price Variance

Labor Price Variance – It arises due to difference in actual rate paid from standard rate. It is calculated as below:

Labor Price Variance = Actual Time (Standard Rate per hour – Actual Rate per hour)

Here, actual time means time for which wage has been paid.

Actual Rate per hour = Actual Direct Labor Cost / Actual Hours Incurred = 58,026 / 10,180 = $5.70 per hour

Actual Hours worked = 10,180

Standard Rate = $5.80 per hour

Labor Rate Variance = Actual Time 10,180 (Standard Rate per hour 5.80 – Actual Rate per hour $5.70)

= $1,018 Favorable

Part 5 – Variable overhead rate variance and variable overhead efficiency variance

Variable Overhead Rate Variance = Actual Hours (Std. Rate – Actual Rate)

Or

(Actual Hours x Std Rate) – (Actual Hours x Actual Rate)

= (10,180*4.10) - $50,900

= $41,738 – 50,900

= $9,162 Unfavorable

Variable Efficiency Variance = Standard Rate (Std Hours allowed for actual production – Actual Hours)

= 4.10 (9,550 – 10,180)

= $2,583 Unfavorable

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Pls ask separate question for remaining part.

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