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 per Hour $5.80 Standard Cost $2.61 During August, 9,415 hours of direct labor time were needed to make 19,700 units of the Jogging Mate. The direct labor cost totaled $53,666 for the month. Required: 1. What is the standard labor-hours allowed (SH) to makes 19,700 Jogging Mates? 2. What is the standard labor cost allowed (SH SR) to make 19,700 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 $4.70 per direct labor-hour. During August, the company incurred $50,841 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.) 1. Standard labor-hours allowed 2. Standard labor cost allowed 3. Labor spending variance 4. Labor rate variance Labor efficiency variance 5. Variable overhead rate variance Variable overhead efficiency variance

Answer 1

Erie company
Number of units manufactured	19700
Standard DLH per unit	0.45	( 27/60)
Total DLH allowed	8865	Answer 1
Standard rate per DLH	5.8
Total standard cost	51417	Answer 2
Actual cost incurred	53666
Total standard cost	51417
Total variance— unfavorable	-2249	Answer 3
Answer 4
LRV = ( SR - AR ) * AH
( 5.8 - 5.7 ) * 9415 = 941.5 ( F )	( AR = 53666 / 9415 )
LEV = ( SH - AH ) * SR
( 8865 - 9415 ) * 5.8 = 3190 ( U )
Answer 5
VOHRV = ( SR - AR ) * AH
( 4.7 - 5.4 ) * 9415 = 6590.5 ( U )	( AR = 50841 / 9415 )
LEV = ( SH - AH ) * SR
( 8865 - 9415 ) * 5.4 =2970 ( U )