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EXERCISE 114 Computing Labour and Overhead Variances [L03 CC17, 18; L04 CC22, 23, 24] Erie Company manufactures an MP3 player called the Jogging Mate. The
EXERCISE 114 Computing Labour and Overhead Variances [L03 CC17, 18; L04 CC22, 23, 24] Erie Company manufactures an MP3 player called the Jogging Mate. The company uses standards to control its costs. The labour and variable overhead standards that have been set for one Jogging Mate MP3 player are as follows: Direct labour 18 minutes $12 $3.60 Variable overhead 18 minutes $4 $1.20 Budgeted xed overhead was estimated to be $31,500 per month. Fixed overhead cost is applied using direct labourhours. During August. 5,?50 hours of direct labour time was recorded in the manufacture of 20.000 units of the Jogging Mate. The direct labour cost totalled $11,600 for the month. Actual variable overhead and xed overhead costs were $21.850 and 3332.000. respectively. Required: I. What direct labour cost should have been incurred in the manufacture ofthe 20,000 units ofthe Jogging Mate? By how much does this differ from the cost that was incurred? 2. Break the difference in cost from part (I) into a labour rate variance and a labour elciency variance
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