Question - Erie Company manufactures a small mp3 player called the Jogging Mate. The Company uses standards to control its costs. The labor standards that have been set for one Jogging Mate mp3 player are as follows:
Standard Hours - 24 minutes
Standard Rate per Hour - $6.00
Standard Cost - $2.40
During August 8,390 hours of direct labor time were needed to make 19,200 units of the Jogging Mate. The direct labor cost totaled $48,662 for the month.
Required -
1. According to the standard, whatr direct labor should have been incurred to make 19,200 units of the Jogging Mate? By how much does this differ from the cost that was incurred?
2. Break down the difference in cost form (1) above into a labor rate variance and a labor efficiency variance.
3. The budgeted variable manufacturing overhead rate is $4.1 per direct labor-hour. During August, the company incurred $38,594 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.