Question

Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The Elabor standards that have been set for one Jogging Mate are as follows: Standard Hours 24 minutes Standard Rate per Hour $5.80 Standard Cost $2.32 During August, 8,420 hours of direct labor time were needed to make 19,800 units of the Jogging Mate. The direct labor cost totaled $47,994 for the month. 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 $4.50 per direct labor-hour. During August, the company incurred $45,468 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

Answer 1

ANSWER

1
Standard labor-hours allowed = 19,800*(24/60)= 7,920
2
Standard labor cost allowed =7,920*5.80= $45,936
3
Labor spending variance = 47,994-45,936= $2,058 U
4
Labor rate variance = 47,994 -(8,420*5.80)= $842 F
Labor efficiency variance = 5.80*(8,420-7,920)= $2,900 U
5
Variable overhead rate variance = 45,468-(8,420*4.50)= $7,578 U
Variable overhead efficiency variance = 4.50*(8,420-7,920)= $2,250 U

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