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 Hours 30 minutes Standard Rate per Hour $ 6.20 Standard Cost $ 3.10 During August, 10,280 hours of direct labor time were needed to make 19,300 units of the Jogging Mate. The direct labor cost totaled $62,708 for the month. Required: 1. What is the standard labor-hours allowed (SH) to makes 19,300 Jogging Mates? 2. What is the standard labor cost allowed (SH x SR) to make 19,300 Jogging Mates? 3. What is the labor spending variance?
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 Hours 30 minutes Standard Rate per Hour $ 6.20 Standard Cost $ 3.10 During August, 10,280 hours of direct labor time were needed to make 19,300 units of the Jogging Mate. The direct labor cost totaled $62,708 for the month. Required: 1. What is the standard labor-hours allowed (SH) to makes 19,300 Jogging Mates? 2. What is the standard labor cost allowed (SH x SR) to make 19,300 Jogging Mates? 3. What is the labor spending variance?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
Hours
30 minutes
Standard Rate
per Hour
$ 6.20
Standard
Cost
$ 3.10
During August, 10,280 hours of direct labor time were needed to make 19,300 units of the Jogging
Mate. The direct labor cost totaled $62,708 for the month.
Required:
1. What is the standard labor-hours allowed (SH) to makes 19,300 Jogging Mates?
2. What is the standard labor cost allowed (SH x SR) to make 19,300 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 $4.50 per direct labor-hour. During August,
the company incurred $51,400 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 not round intermediate calculations.)
1. Standard labor-hours allowed
2. Standard labor cost allowed
3. Labor spending variance
4. Labor rate variance
4. Labor efficiency variance
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