Question

Check my wol 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 27 minutes Standard Rate per Hour $6.20 Standard Cost $2.79 During August, 9,365 hours of direct labor time were needed to make 19,300 units of the Jogging Mate The direct labor cost totaled $56,190 for the month Required: 1. What is the standard labor-hours allowed (SH) to makes 19,300 Jogging Mates? 2. What is the standard labor cost allowed (SHSR) to make 19,300 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 $41.206 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 "P" 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 2. Standard labor cost allowed

Answer 1

Erie Company Requirement 1 19300 Number of units manufactured (a) Standard labor time per unit (27 minutes = 60 minutes per hour) (b) Standard labor-hours allowed (a) (b) 0.45 8685 Requirement 2 Standard labor-hours allowed (a) Standard direct labor rate per hour (b) Standard labor cost allowed (a) (b) 8685 6.2 53847 Requirement 3 Actual direct labor cost (a) Standard labor cost allowed (b) Labor spending variance (a) - (b) 56190 53847 2343 U Actual hours x Actual rate = $56190 Standard hours x Standard rate = 8,685 hours x $6.20 per hour = $53,847 Requirement 4 Labor rate variance = Actual hours x Actual Rate - Actual hours x Standard Rate = 56190 - 9365 x 6.20 = 56190 - 58063 = 1873 F Labor efficiency variance = Actual hours x Standard Rate - Standard hours x Standard rate = 58063-53847 = 4216 U Spending Variance = 1873 F +4216 U = 2343 U Requirement 5 Variable overhead rate variance = Actual Hours of input x Actual rate - Actual Hours of Input x Std.Rate = 41206 - (9365 x 4.10) = 2810 U Variable overhead efficiency variance = Actual Hours of Input x Std.Rate - Standard Hours x Standard Rate = ( 9365 x 4.10 ) - ( 8685 x 4.10 ) = 38397 - 35609 = 2788 U Spending Variance = 2810 U + 2788 U = 5598 U

Quality Motor Company Requirement 1 Actual labor hours 165 hours Efficiency variance = SR (AH-SH) Standard rate Standard hours (56 tune-ups) $ 36.00 140 favorable --> + 900 = 36 x (AH-140) 900 = 36AH X-5,040 36AH = 5,940 AH = 5,940/36 AH = 165 hours Requirement 2 Actual hourly rate $38.42 per hour Rate variance = AH (AR-SR) Actual Hours Standard rate 165 36.00 $ -400 = 165 (AR-36) -400 = 165AR - 5940 165AR=6,340 AR = 6,340/165 AR = 38.42 unfavorable -->