Chapter 10, Problem 4E

EXERCISE 10-4 Direct Labor and Variable Manufacturing Overhead Variances LO10-2, LO10-3
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	per Hour	Cost
18 minutes	$17.00	$5.10

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 $102,350 for the month.

Required:

1. What is the standard labor-hours allowed (SH) to makes 20,000 Jogging Mates?
2. What is the standard labor cost allowed (SH x SR) to make 20,000 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 per direct labor-hour. During August, the company incurred $21,850 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.