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 1,040 hours each month to produce 2,080 sets of covers. The standard costs associated with this level of production are Per Set Total of Covers $40,560 $19.50 Direct materials Direct labor Variable manufacturing overhead $ 7,280 3.50 $ 4,160 2.00 $25.00 (based on direct labor-hours) During August, the factory worked only 600 direct labor-hours and produced 1,800 sets of covers. The following actual costs were recorded during the month Per Set $ 34,200 $19.00 $ 4,140 2.30 $25.00 Total of Covers Direct materials (5,000 yards) Direct labor Variable manufacturing overhead $ 6,660 3.7 At standard, each set of covers should require 2.50 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. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance

Explanation / Answer

1) Materials price variance (Actual price - standard price)*AQ purchased (6.84 - 7.8)*5000 4800 F Material Quantity variance (actual qty used - std qty allowed)*SR (5000 - 1800*2.5)*7.8 3,900 U 2) Direcl labor rate variance (Actual rate - standard rate )*actul hours (11.1 -7)*600 2,460 U direct labor efficiency variance (Actual hrs - standard hrs allowed)*standard rate (600 - 1800*.5)*7 2,100 F 3) Variable overhead rate variance (Actual rate - standard rate )*actul hours (6.9-4)*600 1740 U Variable overhead Efficiency variance (Actual hrs - standard hrs allowed)*standard rate 0 (600-1800*.5)*4 1200 F

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