Question

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 30 minutes Standard Rate per Hour $6.20 Standard Cost $3.10 During August, 10,370 hours of direct labor time were needed to make 19,400 units of the Jogging Mate. The direct labor cost totaled $63,257 for the month. Required: 1. According to the standards, what direct labor cost should have been incurred to make 19,400 units of the Jogging Mate? By how much does this differ from the cost that was incurred? (Round Standard labor time per unit and Standard direct labor rate 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

Answer 1

1) Schedule

Number of unit manufactured	19400
Standard labor time per unit	0.50
Standard labor hour allowed	9700
standard labor cost per hour	6.20
Total Standard labor cost	60140
Actual labor cost	63257
Total Standard labor cost	60140
Total labor variance	3117 U

2) Labor rate variance = (6.2*10370-63257) = 1037 F

Labor efficiency variance = (9700-10370)*6.2 = 4154 U

3) variable overhead rate variance = (4.1*10370-51850) = 9333 U

Variable overhead efficiency variance = (9700-10370)*4.1 = 2747 U