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 $6.00 $2.70 During August, 9,240 hours of direct labor time were needed to make 19,400 units of the Jogging Mate. The direct labor cost totaled $54,516 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 $4.10 per direct labor-hour. During August, the company incurred $40,656 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

Std Labour min per unit: 27 mins
Actual output : 19400 units
Std labour hours (19400*27/60): 8730 hrs
Req 2.
Std labour hours		8730
Std labour rate		6
Std labour cost		52380
Req 3.
labour spending variance = Std Hrs*Std rate -Actual labour cost
		8730 *6 - 54516 = 2136 Unfav
Req 4.
Labour rate variance = Actual hours *Std rate -Actual labour cost
		9240*6 - 54516 = 924 Fav
Labour efficiency variance = Std rate (Std hours-Actual hours)
		6 (8730- 9240) = 3060 Unfav
Req 5.
Variable OH rate variance= Actual hours*Std rate- Actual vriable OH
		9240*4.10 - 40656 = 2772 Unfav
variable OH efficiency variance = Std rate (Std hours-Actual hours)
			4.10 (8730-9240) = 2091 Unfav

answered by: anonymous