Marvel Parts, Inc., manufactures auto accessories. One of the company’s products
ID: 2425128 • Letter: M
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 1,065 hours each month to produce 2,130 sets of covers. The standard costs associated with this level of production are:
During August, the factory worked only 1,050 direct labor-hours and produced 2,700 sets of covers. The following actual costs were recorded during the month:
At standard, each set of covers should require 2.00 yards of material. All of the materials purchased during the month were used in production.
Compute the materials price and quantity 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). Round your intermediate calculations to 2 decimal places. Round "Standard Price" and "Actual Price" answers to 2 decimal places.)
Compute the labor 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). Round your intermediate calculations to 2 decimal places. Round "Standard Rate" and "Actual Rate" answers to 2 decimal places.)
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). Round your intermediate calculations to 2 decimal places. Round "Standard Rate" and "Actual Rate" answers to 2 decimal places.)
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 1,065 hours each month to produce 2,130 sets of covers. The standard costs associated with this level of production are:
Variance Materials price variance Variance Materials quantity varianceExplanation / Answer
1.
Standard quantity of direct materials = 2130 sets * 2 yards = 4260 yards
Standard price of direct materials = Standard Direct materials cost / Standard quantity = $35,358/4260 = $8.30 per yard
Actual quantity of direct materials = 6000 yards
Actual price of direct materials = $43,740 / 6000 = $7.29
a.
Material price variance = (Actual quantity * Actual price) – (Actual quantity * Standard price)
Material price variance = (6000 yards * $7.29) – (6000 yards * $8.30) = $43,740 - $49,800 = $6,060 F
b.
Material quantity variance = (Actual quantity * Standard price) – (Standard quantity * Standard price)
Material quantity variance = (6000 yards * $8.30) – ($4260 yards * $8.30) = $49,800 - $35,358 = $14,442 U
2.
Standard labour hours per set of covers = 1065 hours / 2130 sets = 0.50 hours per set of covers
Standard labour hours for actual production = 2700 sets * 0.50 hours = 1,350 hours
Actual labour hours = 1050 hours
Actual labour rate = $11,340 / 1050 = $10.80
Standard labour rate = $8,520 / 1065 = $8
a.
Labor rate variance = (Actual hours * Actual rate) – (Actual hours * Standard rate)
Labor rate variance = (1050 * $10.80) – (1050 * $8) = $11340 - $8400 = $2940 U
b.
Labour efficiency variance = (Actual hours * Standard rate) – (Standard hours * Standard rate)
Labour efficiency variance = (1050 * $8) – (1350 * $8) = $8400 - $10800 = $2400 F
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