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 $5.80 $2.61 During August, 9,565 hours of direct labor time were needed to make 19,700 units of the Jogging Mate. The direct labor cost totaled $54,521 for the month. Required: 1. What is the standard labor-hours allowed (SH) to makes 19,700 Jogging Mates? 2. What is the standard labor cost allowed (SH × SR) to make 19,700 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 $43,999 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

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akindeleot akindeleot · Answer 1 · 2020-04-03T16:33:55+02:00

Answer:

1) Standard labor hour allowed = 19,700 * 27/60 = 8,865 Hour

2) Standard labor cost allowed = 8,865 * 5.8 = $51,417

3) Labor spending variance = $51,417 - $54,521 = 3,104 U

4) Labor rate variance = (5.8 * 9565 - 54,521) = 956 F

Labor efficiency variance = (8,865 - 9,565) * 5.8 = 4,060 U

5) Variable overhead rate variance = (4.1 * 9,565 - 43,999) = 4,782.5 U

Variable overhead efficiency variance = (8865 - 9565) * 4.1 = 2870 U