Question

Erle 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 Standard Rate Standard Hours per Hour Cost 30 minutes $6.20 $3.10 During August, 10,410 hours of direct labor time were needed to make 19,800 units of the Jogging Mate. The direct labor cost totaled $63,501 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 (SHSR) 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 $4.70 per direct labor hour. During August, the company incurred $54,132 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month. (For requirements 3 through , indicate the effect of each variance by selecting "P" for favorable, "U" for unfavorable, and "None" for no effect (.e., zero variance). Input all amounts as positive values. Do not round Intermediate calculations.) 9,900 $ 61,380 $ 2,1210 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 officiency variance

Answer 1

6.2 Per Hr 0.50 Hours 9900 Hours 19800 Mates 10410 Hours 6.10 Per Hr 4.70 Hours 5.20 Hours Data Srandard Rate SR Standard Hours per Unit (30/60) Standards Hours Required (19600*0.45) SH Actual Output Actual direct labor Hours AH Actula Rate (63501/10410)) AH Standard rate of Variale overhead AH Actula Rate of varible OH (54132/10410) AH Answers Standrad Quanity of Labour Hours Standard Labor cost allowed Labor spending Variance (63501-61380) Labor Rate araince (AR-SR)* AH =(6.1-6.2)*10410 Labor Efficiency Varaiance (AH-SH)*SR=(10410-9900)*6.20 Variable overhead Rate Variance (AR-SR)* AH =(5.2-4.70) *10410 Varaible overhead Efficiency Varaiance (AH-SH)*SR=(10410-9900) *4.7 9900 0.50*19800 61380 9900*6.2 2121 U 1041F 3162U 5205 U 2397 U

Data Direct Material Standard Price SP 1.80 Per Pound Standard quantity Per unit 7.1 pounds Standard Quantity for 7.1 * 2500 SQ 17750 pounds Actual Output 2500 Units Actual Quantity Purchased AQP 19250 pounds Actual Quantity Used AQ 19250 pounds Actual Price of Material AP 1.70 Per Pound Direct Labor Standard Rate SR 12 Per hour Standard hours per unit 0.2 hours Standard Hours for Actual 2500 0.2 SH 500 Hours Actual Output 2500 Units Actual hours Worked AH 400 hours Actual rate 5200 / 400 AR 13.00 Per hour Answer: 1 Material Price Variance 1925 F MaterialQuanity Variance 2700 U 2 Labor rate Variance = 400 U labor Efficiency Variance 1200 F

= -1925 Numerical Calculation Material Price Variance =(AQ*AP)-(AQ*SP) ( 19250 * 1.70 ) -1 19250 * 1.80 ) MaterialQuanity Variance =(AQ*SP)-(SQ*SP) (19250 1.80 ) - 1 17750 * 1.80 ) Labor rate Variance =(AH*AR)-(AH*SR) 400 13.00 ) - 1 400 12.00 ) labor Efficiency Variance =(AH*SR)-(SH*SR) 12.00 ) -( 500 * 12.00) 2700 = 400 400 = -1200