Exercise 10-4 (Algo) 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 Hours 27 minutes Standard Rate per Hour $ 5.80 Standard Cost $ 2.61 During August, 9,105 hours of direct labor time were needed to make 19,100 units of the Jogging Mate. The direct labor cost totaled $51,899 for the month. Required: 1. What is the standard labor-hours allowed (SH) to makes 19,100 Jogging Mates? 2. What is the standard labor cost allowed (SH × SR) to make 19,100 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 $45,525 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 5. Variable overhead rate variance 5. Variable overhead efficiency variance

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Exercise 10-4 (Algo) 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: During August, 9,105 hours of direct labor time were needed to make 19,100 units of the Jogging Mate. The direct labor cost totaled $51,899 for the month. Required: What is the standard labor-hours allowed (SH) to makes 19,100 Jogging Mates? What is the standard labor cost allowed (SH ×�� ) to make 19,100 Jogging Mates? What is the labor spending variance? What is the labor rate variance and the labor efficiency variance? The budgeted variable manufacturing overhead rate is $4.50 per direct labor-hour. During August, the company incurred $45,525 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.)

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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