Question

Exercise 10-4 Direct Labor and Variable Manufacturing Overhead Variances [LO10-2, LO10-3] 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: Standard Hours 24 minutes Standard Rate per Hour $5.80 Standard Cost $2.32 During August, 8,350 hours of direct labor time were needed to make 19,600 units of the Jogging Mate. The direct labor cost totaled $46,760 for the month. Required: 1. According to the standards, what direct labor cost should have been incurred to make 19,600 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.) Number of units manufactured Standard labor time per unit Total standard hours of labor time allowed Standard direct labor rate per hour Total standard direct labor cost Actual direct labor cost Standard direct labor cost Total variance—unfavorable

Answer 1

Number of units manufactured	19,600
Standard labor time per unit	24 minutes
Total standard hours of labor time allowed (19,600*24/60)	7,840
Standard direct labor rate per hour	$5.80
Total standard direct labor cost	45,472
Actual direct labor cost	46,760
Standard direct labor cost	45,472
Total variance - unfavorable	$1,288