Erie Company manufactures a small CD player called the Jogging Mate. The company uses standards tocontrol its costs. The labor standards that have been set for one Jogging Mate CD player are as follows:Standard Standard Rate StandardHours per Hour Cost18 minutes $12.00 $3.60During 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 howmuch 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 efficiencyvariance.3. The budgeted variable manufacturing overhead rate is $4 per direct labor-hour. During August, thecompany incurred $21,850 in variable manufacturing overhead cost. Compute the variable overheadrate and efficiency variances for the month.
Erie Company manufactures a small CD player called the Jogging Mate. The company uses standards 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 efficiency
variance.
3. The budgeted variable manufacturing overhead rate is $4 per direct labor-hour. During August, the
company incurred $21,850 in variable
rate and efficiency variances for the month.
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