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Erie Company manufactures a small MP3 player called the Jogging Mate. The company uses standards to control its costs. The labour standards that have been set for one Jogging Mate MP3 player are as follows:
Standard hour Standard rate per hour Standard cost
15 minutes £ 9.00 £ 2.25
During August, 4,800 hours of direct labour time were recorded in the manufacture of 20,000 units of the Jogging Mate. The direct labour cost totalled £50,400 for the month.
Required:
Problem 1. By how much does this differ from the cost that was incurred?
Problem 2. Break down the difference between direct labour cost that should have been incurred in the manufacture of the 20,000 units of the Jogging Mate and the cost that was incurred into a labour rate variance and a labour efficiency variance. (Do not round your intermediate calculations.)
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