E9–4 Time allowed: 20 minutes Erie Company manufactures a small cassette player called the Jogging Mate.

The company uses standards to control its costs. The labour standards that have been set for one Jogging Mate cassette player are as follows:

During August, 5,750 hours of direct labour time were recorded in the manufacture of 20,000 units of the Jogging Mate. The direct labour cost totalled £73,600 for the month.
Required 1 What direct labour cost should have been incurred in the manufacture of the 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 Question 1 above into a labour rate variance and a labour efficiency variance.
3 The budgeted variable manufacturing overhead rate is £4 per direct labourhour.
During August, the company incurred £21,850 in variable manufacturing overhead cost. Compute the variable overhead spending and efficiency variances for the month.

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Standard hours 18 minutes Standard rate per hour 12.00 Standard cost 3.60