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Erie Company manufactures a small CD player called the Jogging Mate. The company uses stan- dards to control its costs. The labor standards that have been set for one Jogging Mate CD player are as follows: Standard Standard Rate Standard Hours per Hour Cost 18 minutes $12.00 $3.60 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 $73,600 for the month. Required: 1. What direct labor cost should have been incurred to make 20,000 units of the Jogging Mate? By how much does this differ from the cost that was incurred? 2. Break down the difference in cost from (1) above into a labor rate variance and a labor effi- ciency variance. 3. 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.

Erie Company manufactures a small CD player called the Jogging Mate. The company uses stan- dards to control its costs. The labor standards that have been set for one Jogging Mate CD player are as follows: Standard Standard Rate Standard Hours per Hour Cost 18 minutes $12.00 $3.60 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 $73,600 for the month. Required: 1. What direct labor cost should have been incurred to make 20,000 units of the Jogging Mate? By how much does this differ from the cost that was incurred? 2. Break down the difference in cost from (1) above into a labor rate variance and a labor effi- ciency variance. 3. 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.

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter4: Job Order Costing
Section: Chapter Questions
Problem 2PA: York Company Is a machine shop that estimated overhead will be $50,000, consisting of 5,000 hours of...
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Erie Company manufactures a small CD player called the Jogging Mate. The company uses stan- dards to control its costs. The labor standards that have been set for one Jogging Mate CD player are as follows: Standard Standard Rate Standard Hours per Hour Cost 18 minutes $12.00 $3.60 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 $73,600 for the month. Required: 1. What direct labor cost should have been incurred to make 20,000 units of the Jogging Mate? By how much does this differ from the cost that was incurred? 2. Break down the difference in cost from (1) above into a labor rate variance and a labor effi- ciency variance. 3. 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.
Transcribed Image Text:Erie Company manufactures a small CD player called the Jogging Mate. The company uses stan- dards to control its costs. The labor standards that have been set for one Jogging Mate CD player are as follows: Standard Standard Rate Standard Hours per Hour Cost 18 minutes $12.00 $3.60 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 $73,600 for the month. Required: 1. What direct labor cost should have been incurred to make 20,000 units of the Jogging Mate? By how much does this differ from the cost that was incurred? 2. Break down the difference in cost from (1) above into a labor rate variance and a labor effi- ciency variance. 3. 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.
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