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: ints Standard Hours 24 minutes Standard Rate Standard per Hour Cost $6.20 $2.48 eBook During August, 8,700 hours of direct labor time were needed to make 19,800 units of the Jogging Mate. The direct labor cost totaled $53,070 for the month. Hint Print eferences 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 $4.10 per direct labor-hour. During August, the company incurred $40,020 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.)

Answer 1

Solution

Standard labor hours Allowed	7920
Standard labor cost allowed	$        49,104.00
Labor Spending Variance	$          3,966.00	Unfavourable-U
Labor rate Variance	$              870.00	Favourable-F
Labor Efficiency variance	$          4,836.00	Unfavourable-U
Variable overhead Rate Variance	$          4,350.00	Unfavourable-U
Variable overhead Efficiency Variance	$          3,198.00	Unfavourable-U

Working

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                    6.20	-	$                     6.10	)	x	8700
	870
	Variance		$                 870.00			Favourable-F
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	7920	-	8700	)	x	$              6.20
	-4836
	Variance		$             4,836.00			Unfavourable-U
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$         49,104.00	-	$           53,070.00	)
	-3966
	Variance		$             3,966.00			Unfavourable-U
Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                    4.10	-	$                     4.60	)	x	8700
	$         (4,350.00)
	Variance		$             4,350.00			Unfavourable-U
Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	7920	-	8700	)	x	$              4.10
	$         (3,198.00)
	Variance		$             3,198.00			Unfavourable-U
Variable Overhead Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$         32,472.00	-	$           40,020.00	)
	-7548
	Variance		$             7,548.00			Unfavourable-U

.

Standard DATA for		19800	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct labor	( 0.4 Hour x 19800 Units)=7920 Hour	$                   6.20	$            49,104.00
Variable Overhead	( 0.4 Hour x 19800 Units)=7920 Hour	$                   4.10	$            32,472.00

.

Actual DATA for		19800	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct labor	8700	$            6.10	$          53,070.00
Variable Overhead	8700	$            4.60	$          40,020.00