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

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: Hours 27 minutes Standard Standard Rate Standard per Hour $6.00 Cost $2.70 During August, 9,355 hours of direct labor time were needed to make 19,100 units of the Jogging Mate. The direct labor cost totaled $54,259 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 $4.30 per direct labor-hour. During August, the company incurred $43,033 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.

Explanation / Answer

Dear Student,    In each and every question. First we try to understand the question . If you understand the question well, you can get the required answer very well. Lets solve the given problem by understanding the question. Given, Standard rate per hour = 6 Standard rate per unit = 2.7 Standard time required per unit = 27 minutes Actual cost = 54,259 Actual production = 19,100 Actual Labour hours used = 9355 Actual cost per hour 5.8 1 Standard labour hours = (SH) Actual out put * standard time per unit = 19100*27/60 8595 hours 2 Standard labour cost = Standard hours * standard rate per hour = 8595*6 51570 3 Labour variance = standard cost - actual cost = 51570-54259 2689 Unfavourable 4 Labour rate variance = Standard output * (AR - SR) = 9355 *(5.8-6) 1871 favourable Labour efficency variance = SR* (AH-SH) = 6*(9355-8595) 4560 unfavourable 5 VOH variance Standard VOH Rate per hour (SR)= 4.3 Actual VOH = 43033 Acctual VOH rate per hour (AR)= 43033/9355 4.6 VOH rate variance= Standard output * (AR - SR) = 9355 *(4.6-4.3) 2087 Unfavourable VOH efficency variance = SR* (AH-SH) = 4.3*(9355-8595) 3268 Unfavourable

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