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 $5.60 $2.52 During August, 9,390 hours of direct labor time were needed to make 19,200 units of the Jogging Mate. The direct labor cost totaled $51,645 for the month. Required: 1. What is the standard labor-hours allowed (SH) to makes 19,200 Jogging Mates? 2. What is the standard labor cost allowed (SH × SR) to make 19,200 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 $46,950 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

	1. Standard labor-hours allowed 2. Standard labor cost allowed 3. Labor spending variance 4. Labor rate variance Labor efficiency variance 5. Variable overhead rate variance Variable overhead efficiency variance

Answer 1

Answer:

1	Standard labor-hours allowed	8640
2	Standard labor cost allowed	48384
3	Labor spending variance	3261	U
4	Labor rate variance	939	F
	Labor efficiency variance	4200	U
5	Variable overhead rate variance	8451	U
	Variable overhead efficiency variance	3075	U

Working notes for the above answer is as under

1

Number of meals prepared	19200
Standard direct labor-hours per meal (27/60)=0.45 hour	× 0.45
Total direct labor-hours allowed	8640
Standard direct labor cost per hour	× $5.6
Total standard direct labor cost	48384
Actual cost incurred	51645
Total standard direct labor cost (above)	48384
Total direct labor variance	3261	Unfavorable