Georgian Company manufactures a mobile fitness device called the Sking Mate. The

Question

Georgian Company manufactures a mobile fitness device called the Sking Mate. The company uses standards to control its costs. The labor standards that have been set for one Skiing Mate are as follows: Standard Hours 24 minutes Standard Rate per Hour $20.00 Standard Cost $8.00 During June, 17,750 hours of direct labor time were needed to make 45,000 units of the Skiing Mate. The direct labor cost totaled $363,875 for the month. Required 1. What is the standard labor-hours allowed (SH) to prepare 45,000 Skiing Mates? 2. What is the standard labor cost allowed (SH x SR) to prepare 45,000 Skiing Mates? 3. What is the labor spending variance? 4. What is the labor efficiency variance and the labor rate variance? 5. The budgeted variable manufacturing overhead rate is $9 per direct labor-hour. During June, the company incurred $161,525 in variable manufacturing overhead cost. Compute the variable overhead efficiency and rate variances for the month.

Explanation / Answer

Req 1: Actual output: 45000 units Std labor hours per unit: 24 minutes Std hours allowed (45000*24/60): 18000 Req 2: Std labour hours allowed 18000 hrs Std rate per hour 20 Std labour cost allowed 360000 Req 3: Labor spending variance: Std labour cost -Actual labor cost 360000-363875 = 3875 Unfav Req 4: Labor efficiency Vriance: Std rate (Std hours-Actual hours) 20 (18000-17750) = 5000 Fav Labor rate variance: Actual hours (Std rate-Actual rate) 17750 ( 20-20.50 ) = 8875 Unfav Req 5: Std OH rate per hour: 9 Actual OH rate per hour (161525/17750)= 9.10 per hr Variable Efficiency Variance: Std rate (Std hours-Actual hours) 9.00 (18000 - 17750 ) = 2250 Fav Variable rate variance: Actual hours (Std oh rate- actual Oh rate) 17750 (9.0-9.10 ) = 1775 Unfav

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