Check my 4 Erie Company manufactures a mobile fitness device called the Jogging
ID: 2566793 • Letter: C
Question
Check my 4 Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows: Standard Standard Rate Standard Hours 24 minutes Cost $2.32 per Hour eBook $5.80 Hint During August, 8,490 hours of direct labor time were needed to make 19,600 units of the Jogging Mate. The direct labor cost totaled $47,544 for the month Required 1. What is the standard labor-hours allowed (SH) to makes 19,600 Jogging Mates? 2. What is the standard labor cost allowed (SH x SR) to make 19,600 Jogging Mates? 3. What is the labor spending variance? 4. What is the labor rate variance and the labor efficiency variance? 5. The budgeted variable manufacturing overhead rate is $4.70 per direct labor-hour. During August, the company incurred $45,846 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month (For requirements 3 through 5, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do no round intermediate calculations.) 1. Standard labor-hours allowed 2. Standard labor cost allowed 3. Labor spending variance 4. Labor rate variance Labor efficiency variance 5. Variable overhead rate variance Variable overhead efficiency varianceExplanation / Answer
Answer :
1. Standard labor hours allowed = Actual number of units X standard hours per unit
Actual number of units = 19600 units
standard hours per unit = 24 minutes
Standard labor hours allowed = Actual number of units X standard hours per unit
= 19600 X 24 minutes
= 470400 minutes or 7840 Hours
2. Standard labor cost allowed = Standard labor hours allowed X standard rate per hour
Standard labor hours allowed = 470400 minutes or 7840 Hours
standard rate per hour = $ 5.80
= 7840 Hours X $ 5.80
= $ 45,472.
3. Labour spending variance = Standard labor cost - Actual labor cost
Standard labor cost = $ 45,472. (as per answer no.2)
Actual labor cost = $ 47,544
= $ 45,472 - 47,544
= $ (2072) Unfovorable
4. Labor rate variance = (Standard rate - Actual rate) x Actual hours worked
Actual rate = Direct labor cost / Direct labor hours = $ 47544/8490 Hours = 5.6 Hours
Standard rate = 5.80 per hour
Labor rate variance = (Standard rate - Actual rate) x Actual hours worked
=($ 5.80 - 5.60) X 8490 hours
= $ 1698 Favorable.
Labor efficiency variance = (Standard hours - Actual hours) x Standard rate
Actual hours = 8490 hours
Standard hours = 7840 Hours
Standard rate = 5.80 per hour
= (7840 - 8490) X 5.80 per hour
= $ 3770 Unfovorable
5. Variable overhead rate variance = Actual hours worked x (Standard overhead rate - Actual overhead rate)
Actual overhead rate = $ 45,846 / 8490 hours = $ 5.4
Standard overhead rate = $ 4.70 per hour
Actual hours worked = 8490 hours
Variable overhead rate variance = Actual hours worked x (Standard overhead rate - Actual overhead rate).
= 8490 hours X ( 4.70 - 5.4)
= 5943 Unfavorable
Variable overhead efficiency variance = Standard overhead rate x (Standard hours - Actual hours)
Standard overhead rate = $ 4.70 per hour , Actual hours = 8490 hours, Standard hours = 7840 Hours
Variable overhead efficiency variance = Standard overhead rate x (Standard hours - Actual hours)
= $4.70 X (7840- 8490)
= $ 3,055 Unfovarable