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 24 minutes Standard Rate per Hour $5.40 Standard Cost $2.16 During August, 8,360 hours of direct labor time were needed to make 19,300 units of the Jogging Mate. The dire labor cost totaled $43,472 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 (SH X SR) to make 19,300 Jogging Mates? 3. What is the labor spending variance? 4. What is the labor rate variance and the labor efficiency variarkte? 5. The budgeted variable manufacturing overhead rate is $4.50 per direct labor-hour. During August, the compan incurred $40,128 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 (.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)

Answer 1

1)	Standard labor hours allowed
	Actual units *standard hours per unit
	19300*24/60
	7720	hours
2)	Standard labor cost allowed
	7720*5.40
	41688
3)	labor spending variance
	actual cost -standard labor cost allowed
	43472-41688
	1784	U
4)	labor rate variance
	(actual rate- standard rate)*actual hours
	43472-8360*5.4
	1672	F
	labor Efficiency variance
	(actual hours - standard hours allowed)*standard rate
	(8360-7720)*5.4
	3456	U
5)	variable overhead rate variance
	(actual rate- standard rate)*actual hours
	40128 -8360*4.5
	2508	U
	labor Efficiency variance
	(actual hours - standard hours allowed)*standard rate
	(8360-7720)*4.5
	2880	U