Question

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 Standard Rate per Hour Standard Cost 24 minutes $5.80 $2.32 During August, 8,550 hours of direct labor time were needed to make 19,400 units of the Jogging Mate. The direct labor cost totaled $48,735 for the month. Required: 1. What is the standard labor-hours allowed (SH) to makes 19,400 Jogging Mates? 2. What is the standard labor cost allowed (SH × SR) to make 19,400 Jogging Mates? 3. What is the labor spending variance? 4. What is the labor rate variance and the labor ef

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Standard Hours= 24 minutes (0.4)

Standard Rate per Hour=$5.8

Standard Cost= $2.32 per unit

During August, 8,550 hours of direct labor time were needed to make 19,400 units of the Jogging Mate.

The direct labor cost totaled $48,735 for the month.

First, we need to calculate the standard hours allowed to produce 8,550 units.

Standard hours= 19,400*0.4= 7,760 hours

Now, we can calculate the standard cost:

Standard cost= 7,760*5.8= $45,008

Finally, to calculate the direct labor efficiency and rate variance, we need to use the following formulas:

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

Direct labor time (efficiency) variance= (7,760 - 8,550)*5.8

Direct labor time (efficiency) variance= $4,582 unfavorable

Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity

Actual rate= 48,735/8,550= $5.7

Direct labor rate variance= (5.8 - 5.7)*8,550

Direct labor rate variance= $855 favorable