Erie Company manufactures a small mp3 player called the Jogging Mate. The compan
ID: 2444574 • Letter: E
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:
During August, 8,440 hours of direct labor time were needed to make 19,800 units of the Jogging Mate. The direct labor cost totaled $46,420 for the month.
According to the standards, what direct labor cost should have been incurred to make 19,800 units of the Jogging Mate? By how much does this differ from the cost that was incurred? (Round Standard labor time per unit to 2 decimal places.)
Break down the difference in cost from (1) above into a labor rate variance and a labor efficiency variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round intermediate calculations.)
The budgeted variable manufacturing overhead rate is $4.7 per direct labor-hour. During August, the company incurred $43,888 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round intermediate calculations and round your final answers to nearest whole dollar.)
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:
Explanation / Answer
Answer 1. Number of units manufactured 19800 Standard labor time per unit 24 Min. or 0.40 Hrs Total standard hours of labor time allowed 7920 Hrs (19800 Units X .40 Hrs) Standard direct labor rate per hour $5.60 per hrs Total standard direct labor cost $44,352 (7920 hrs X $5.60) Actual direct labor cost $46,420 Standard direct labor cost $44,352 Total variance—unfavorable $2,068 Answer 2. Labour Rate Variance = (Standard Rate - Actual Rate) X Actual Hours Worked Labour Rate Variance = (5.60 - 5.50) X 8440 = $844 (F) Actual rate Per hr = $46420/8440 Hrs = $5.50 per hr. Labour Efficiency Variance = (Standard hours - Actual hours) x Standard rate = (7920 - 8440) X 5.60 = $2912 (U) Answer 3. Variable Overhead Rate Variance = (Standard Rate - Actual Rate) X Actual Hours Worked = (4.70 - 5.20) X 8440 = $4220 (U) Standard Rate = $4.70 per Hr Actual rate = $43888 / 8440 hr = $5.20 per hrs Variable overhead Efficiency Variance = (Standard hours - Actual hours) x Standard rate = (7920 - 8440) X 4.70 = $2444 (U)
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