Question

0 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 Standard Rate per Hour $6.40 Standard Cost $3.20 30 minutes During August, 10.500 hours of direct labor time were needed to make 19,800 units of the Jogging Mate. The direct labor cost totaled $66,150 for the month 1 0 Required: 1. What is the standard labor-hours allowed (SH) to makes 19,800 Jogging Mates? 2. What is the standard labor cost allowed (SH SR) to make 19,800 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 $48.300 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 (ie., 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. Varlable overhead rate variance Variable overhead efficiency variance

Answer 1

Answers

• [1] Standard labor allowed = 19800 units x (30 min / 60 min) = 9,900
• [2] Standard labor cost allowed = 19800 units x $ 3.20 = $ 63,360
• [3]

Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$                      63,360.00	-	$            66,150.00	)
	-2790
	Variance		$              2,790.00			Unfavourable-U

• [4]

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                                6.40	-	$                       6.30	)	x	10500
	1050
	Variance		$              1,050.00			Favourable-F
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	9900	-	10500	)	x	$                           6.40
	-3840
	Variance		$              3,840.00			Unfavourable-U

• [5]

Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                                4.30	-	$                       4.60	)	x	10500
	-3150
	Variance		$              3,150.00			Unfavourable-U
Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	9900	-	10500	)	x	$                           4.30
	-2580
	Variance		$              2,580.00			Unfavourable-U