Marvel Parts, Inc., manufactures auto accessories. One of the company\'s product

Question

Marvel Parts, Inc., manufactures auto accessories. One of the company's products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,070 hours each month to produce 2140 sets of covers. The standard costs associated with this level of production are: Per Set Total of Covers Direct materials Direct labor Variable manufacturing overhead (based $26,964 $12.60 11,770 5.50 3,6381.70 $19.80 on direct labor-hours) During August, the factory worked only 1,000 direct labor-hours and produced 2,400 sets of covers. The following actual costs were recorded during the month: Per Set Total of Covers Direct materials (6,000 yards) Direct labor Variable manufacturing overhead $29,280 $12.20 5.70 2.40 $20.30 $13,680 $ 5,760 At standard, each set of covers should require 1.5 yards of material. All of the materials purchased during the month were used in production. Required 1. Compute the materials price and quantity variances for August. 2. Compute the labor rate and efficiency variances for August. 3. Compute the variable overhead rate and efficiency variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance) Input all amounts as positive values.)

Explanation / Answer

Std material qty for actual output (2400*1.5): 3600 yards Std price per yard: (12.6/1.50): 8.40 per yard Actual material 6000 yards Actual price (29280/6000): 4.88 per yard Metrial price variance: Actual Qty (Std price-Actual price) 6000 (8.40-4.88)= $ 21120 Favorable Material Quantity Variance: Std price (Std quantity -Actual quantity) 8.40 ( 3600- 6000)= $20160 unfav Std labour hours allowed: (2400*0.50): 1200 hours Std labour rate per hour: 11.00 Actual hours: 1000 hours Actual rate (13680/1000): 13.68 per hour Labour rate variance: Actual hours (Std rate-Actual rate) 1000 (11-13.68) = $2680 Unfavorable Labour efficiency variance: Std rate (Std hours-Actual hours) 11.00 ( 1200-1000) = $ 2200 favorable Std variable OH rate per hour (1.70/0.5): $ 3.40 Actual OH rate per hour (5760/1000): 5.76 per hour Variable OH rate variance: Actual hours(Std OH rate-Actual OH rate) 1000 (3.40 - 5.76) = 2360 Unfavorable Variable OH efficiency variance: Std rate (Std hours-Actual hours) 3.40 (1200-1000) = $680 favorable

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