Question

Erie Company manufactures a small mp3 player called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate mp3 player are as follows: Standard Hours Standard Rate per Hour Standard Cost 24 minutes $6.20 $2.48 During August, 8,150 hours of direct labor time were needed to make 19,100 units of the Jogging Mate. The direct labor cost totaled $48,900 for the month. Required:

1. According to the standards, what direct labor cost should have been incurred to make 19,100 units of the Jogging Mate? By how much does this differ from the cost that was incurred? (Round Standard labor time per unit and Standard direct labor rate to 2 decimal places.)

2. Break down the difference in cost from (1) above into a labor rate variance and a labor efficiency variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round intermediate calculations.)

3. The budgeted variable manufacturing overhead rate is $4.5 per direct labor-hour. During August, the company incurred $44,010 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round intermediate calculations and round your final answers to nearest whole dollar.)

Answer 1

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Erie Company	Amount $
Answer 1
Actual units	19,100.00
Standard Labor cost per unit	2.48
Standard Labor cost of Actual units	47,368.00

Answer 2	Finished Units	Input per unit	Input required	Rate per unit	Amount
Direct Labor Variance
Standard Hours allowed for Actual Output at Standard Rate	19,100.00	0.40	7,640.00	6.20	47,368.00	D
Actual Hours of Input, at Standard Rate			8,150.00	6.20	50,530.00	E
Actual Hours of Input, at Actual Rate					48,900.00	F
Efficiency Variance (E-D)					3,162.00	Unfavorable
Price Variance (F-E)					(1,630.00)	Favorable
Total Labor Variance (F-D)					1,532.00	Unfavorable
Answer 3
Variable Overhead Variance
Standard Hours allowed for Actual Output at Standard Rate	19,100.00	0.40	7,640.00	4.50	34,380.00	G
Actual Hours of Input, at Standard Rate			8,150.00	4.50	36,675.00	H
Actual Hours of Input, at Actual Rate					44,010.00	I
Variable overhead efficiency variance (H-G)					2,295.00	Unfavorable
Variable overhead Spending variance (I-H)					7,335.00	Unfavorable
Total Variable overhead variance (I-G)					9,630.00	Unfavorable