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 Hours Standard Rate per Hour Standard Cost 27 minutes $5.80 $2.61 During August, 9,475 hours of direct labor time were needed to make 19,500 units of the Jogging Mate. The direct labor cost totaled $54,008 for the month. Required: 1. According to the standards, what direct labor cost should have been incurred to make 19,500 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.)
2. 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.)
3. The budgeted variable manufacturing overhead rate is $4.7 per direct labor-hour. During August, the company incurred $53,060 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.)

Explanation / Answer

1) Schedule :

2) Labour rate variance = (5.8*9475-54008) = 947 F

Labour effciency variance = (8775-9475)*5.8 = 4060 U

3) Variable overhead rate variance = (4.7*9475-53060) = 8528 U

Variable overhead efficiency variance = (8775-9475)*4.7 = 3290 U

Numer of units manufactured 19500 Standard labour hour per unit (27/60) 0.45 Standard hour allowed 8775 Rate per hour 5.80 Standard cost 50895 Actual cost 54008 Standard cost 50895 Total labour variance 3113 U

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