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	Standard Rate per Hour	Standard Cost
27 minutes	$6.40	$2.88

During August, 9,460 hours of direct labor time were needed to make 19,400 units of the Jogging Mate. The direct labor cost totaled $58,652 for the month.

Required:

1. What is the standard labor-hours allowed (SH) to makes 19,400 Jogging Mates?

2. What is the standard labor cost allowed (SH × SR) to make 19,400 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 $43,516 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 Standard labor cost allowed Labor spending variance Labor rate variance Labor efficiency variance Variable overhead rate variance Variable overhead efficiency variance

Answer 1

= brandard Labore houses allowed z (SH) Standard y Actual Hours Units ») » 27 X 19400 523800 minutes or 8730 hours 2. 2 brandard Labor Cost (SHXSR) 8730 X (SH) $55872 $6.40 per house (SR) - 3. Labot speeding. Sramdard - Actual - Variance Cost Cost >> $ 55872 - $58,652 | 9 2180 0 4. Labor Rate Variance (SR - Actuel Ratex (AR) I Actual hours - 16.40 - 586527. Jan 3 T (9460 9*9460 16.40-6:20] 9460 1892 ( Labae_Elfecimmy Variance (SH - AH) X SR (8730 - 9460) x 6.40 46.72 U

Variable manufachaying a Overhead Rate' (Budgeted) $4.30 per direct Labor how Actual variable Manufacturing Overheed Rate 4439 $43516 9460 $4.60 per direct labor hour Achal hours * Variable Oveshead. Some Rate Variane Budeered Rate - Acheel & y (4. 30 - 4.60)44 460 212838 U. * Variable Overhead Efficiency variance Standard Ackel) x Budgeled (hows hows Overhiad Rare (8730 - 9460)x 4.30 3139 U

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