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 27 minutes Standard Rate Standard per Hour Cost $5.80 $2.61 During August, 9,490 hours of direct labor time were needed to make 19,600 units of the Jogging Mate. The direct labor cost totaled $53,144 for the month. Required: 1. What is the standard labor-hours allowed (SH) to makes 19,600 Jogging Mates? 2. What is the standard labor cost allowed (SH SR) to make 19,600 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 $45,552 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

Answer 1

1	Standard labor hours allowed	8820		=19600*(27/60)
2	Standard labor cost allowed	51156		=8820*5.80
3	Labor spending variance	1988	U	=53144-51156
4	Labor rate variance	1898	F	=53144-(9490*5.8)
	Labor efficiency variance	3886	U	=5.8*(9490-8820)
5	Variable overhead rate variance	4745	U	=45552-(9490*4.3)
	Variable overhead efficiency variance	2881	U	=4.3*(9490-8820)