Question

In: Accounting

Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control...

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, 9,550 hours of direct labor time were needed to make 19,800 units of the Jogging Mate. The direct labor cost totaled $53,480 for the month.

Required:

1. What is the standard labor-hours allowed (SH) to makes 19,800 Jogging Mates?

2. What is the standard labor cost allowed (SH × SR) to make 19,800 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 $4.50 per direct labor-hour. During August, the company incurred $45,840 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.)

Solutions

Expert Solution

Solution

Standard labor hours Allowed 8910
Standard labor cost allowed $        51,678.00
Labor Spending Variance $          1,802.00 Unfavourable-U
Labor rate Variance $          1,910.00 Favourable-F
Labor Efficiency variance $          3,712.00 Unfavourable-U
Variable overhead Rate Variance $          2,865.00 Unfavourable-U
Variable overhead Efficiency Variance $          2,880.00 Unfavourable-U

Working

Standard DATA for 19800 Units
Quantity (SQ) Rate (SR) Standard Cost
[A] [B] [A x B]
Direct labor ( 0.45 Hour x 19800 Units)=8910 Hour $                   5.80 $            51,678.00
Variable Overhead ( 0.45 Hour x 19800 Units)=8910 Hour $                   4.50 $            40,095.00

.

Actual DATA for 19800 Units
Quantity (AQ) Rate (AR) Actual Cost
Direct labor 9550 $            5.60 $          53,480.00
Variable Overhead 9550 $            4.80 $          45,840.00

.

Labor Rate Variance
( Standard Rate - Actual Rate ) x Actual Labor Hours
( $                    5.80 - $                        5.60 ) x 9550
1910
Variance $                1,910.00 Favourable-F
Labour Efficiency Variance
( Standard Hours - Actual Hours ) x Standard Rate
( 8910 - 9550 ) x $              5.80
-3712
Variance $                3,712.00 Unfavourable-U
Labor Spending Variance
( Standard Cost - Actual Cost )
( $         51,678.00 - $             53,480.00 )
-1802
Variance $                1,802.00 Unfavourable-U
Variable Overhead Rate Variance
( Standard Rate - Actual Rate ) x Actual Labor Hours
( $                    4.50 - $                        4.80 ) x 9550
$         (2,865.00)
Variance $                2,865.00 Unfavourable-U
Variable Overhead Efficiency Variance
( Standard Hours - Actual Hours ) x Standard Rate
( 8910 - 9550 ) x $              4.50
$         (2,880.00)
Variance $                2,880.00 Unfavourable-U
Variable Overhead Spending Variance
( Standard Cost - Actual Cost )
( $         40,095.00 - $             45,840.00 )
-5745
Variance $                5,745.00 Unfavourable-U

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