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 30 minutes Standard Rate per Hour $6.00 Standard Cost $3.00 During August, 10,690 hours of direct labor time were needed to make 20,000 units of the Jogging Mate. The direct labor cost totaled $63,071 for the month. Required: 1. What is the standard labor-hours allowed (SH) to makes 20,000 Jogging Mates? 2. What is the standard labor cost allowed (SH SR) to make 20,000 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 $53,450 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month. ces (For requirements 3 through 5, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (.e., zero variance). Input all amounts as positive values. Do not round Intermediate calculations.) 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 < Prey 5 of 5 !!! Next

Answer 1

Answer 1. Standard labor hours allowed 10000 labor hours 2. Standard labor coce allowed $ 60000 3. labor spending variance | $3071 4. labor rate variance | $ 1069 labor efficiency variance $ 4140 5. Variable overhead rate variance $ 5345 variable overhead efficiency $3105 Variance 1. What is the standard labor hours allowed (SH) to makes 20000 Jogging mates? - Standard Hours allowed for = 0.5 hours one Jogging mate → So, Standard labor hours allowed (SH) = (20000X0.5) = loooo labax hours 2. What is the standard labor cost allowed (SHXSR) to make 20000 Jogging mates? : Standard labour hours (SH) = 10000 labor hours allowed Standard rate (SR) = $6 ber hour Standard labor cost allowed = (10.00 hours * $6) = $ 60000

3. What is the labor spending variance? labor spending variance = f(s HxSR) – CAHX AR] Standard hours allowed (SH) = 10000 labor hours standard rate CSR) = $6 per hour Actual hours worked (AH) = 10690 labor hours Actual rate CAR) = $63071 10690 hours = $5.90 per hour → laboy spending variance - (10000 x 6) - ( 10690x 5:4) = $ ( 60000 - 63071) = $3071 "U" 4. What is the labor rate variance and labor efficiency Variance labay rate variance = (sR-AR) X AH Standard rate (SR) = $6 per hour Actual rate (AR) = $5.9 per hour Actual hours worked = 10696 hours → labor rate variance = $(6-5.9)X 10690 hours = $1069 "F" labor efficiency variance = (SH-AH) X SR = ((10000 10690) hours *X $6] = $4140 "U" (АН)

5. The Budgeted variable Manufacturing overhead rate is $4.50 per Direct labour hour. During August, company Incurred $53450 in Variable manufacturing, overhead cost.compute the variable overhead rate and efficiency variances for the month

→ Variable manufacturing overhead rate variance Standard Cort - Actual of Actual hours Overhead Worked = [10590x24.50) – 53450] - $ 546105 - 53450] = $ 5345 "U" - → variable manufacturing overhead (standard efficiency variance Manufacturing Variable Standard cost of Actual hours worked overhead = [(10000 x $4.50) - (10690x4.5) = $(45000 - 48105) = $3105 "U"