Erie Company manufactures a small mp3 player called the Jogging Mate. The compan

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 Standard Rate Standard per Hour $6.40 Cost Hours 30 minutes During August, 10,630 hours of direct labor time were needed to make 20,000 units of the Jogging Mate. The direct labor cost totaled $66,969 for the month. Required: 1. According to the standards, what direct labor cost should have been incurred to make 20,000 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.) Number of units manufactured Standard labor time per unit Total standard hours of labor time allowed Standard direct labor rate per hour Total standard direct labor cost Actual direct labor cost Standard direct labor cost Total variance

Explanation / Answer

Number of units manufactured 20000 Std labour time per unit 0.5 Total std hours 10000 Std labour rate per hour 6.4 Total Std labour cost 64000 Actual labour cost 66969 Std labour c ost 64000 Total variance 2969 Unfav Labour rate variance: Actual hours (Std rate-Actual rate) 10630 (6.40-6.30)= 1063 fav Labour Efficiency Variance: Std rate (Std hours-Actual hours 6.40 (10000-10630) = 4032 Unfav Std variable Oh rate: $ 4.5 per hour Actual Oh rate per hour (57402/10630)= 5.40 per hour Variable OH rate variance: Actual hours (Std rate-Actual rate) 10630 (4.50-5.40)= 9567 Unfav Variable OH efficiency Variance: Std rate (Std hours-Actual hours) 4.50 (10000-10630) = $ 2835 Unfav

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