Exercise 10-4 Direct Labor and Variable Manufacturing Overhead Variances [L010-2
ID: 2480008 • Letter: E
Question
Exercise 10-4 Direct Labor and Variable Manufacturing Overhead Variances [L010-2, LO10-3 Ene 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 tandard Rate Hours 18 minutes per Hour $12.00 Cost $3 60 During August, 5,750 hours of direct labor time were needed to make 20,000 units of the Jogging Mate. The direct labor cost totaled $73,600 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 to 2 decimal places.) Number of units manufactured Standard labor time per unt Total standard hours of labor time allowed Standard direct labor rate per hou Total standard direct labor cost Actual direct labor cost Standard direct labor cost Total variance-unfavorable 2 Break down the difterence 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.) Labor rate variance Labor efficiency varianceExplanation / Answer
1)
2)Rate variance =actual cost - [AH *SR]
= 73600 - [5750*12]
= 73600 - 69000
= 4600 U
Efficiency variance = SR [AH-SH]
= 12 [ 5750 - 6000]
= - 3000 F
3)Variable overhead rate variance = AH [AR-SR]
= 21850 - [5750 *4]
= 21850 - 23000 = - 1150 F
Efficiency variance = SR[ AH-SH]
= 4[ 5750 - 6000]
= -1000 F
nUMber of units manufactured 20000 standard labor time per unit [18/ 60] .30 Total standatrd hours allowed 6000 tandard direct labor rate 12 Total direct labor cost 72000 Actual direct labor cost 73600 standard direct labor cost 72000 Total variance -Unfavorable 1600Related Questions
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