Marvel Parts, Inc., manufactures auto accessories. One of the company’s products
ID: 2446838 • 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 1,030 hours each month to produce 2,060 sets of covers. The standard costs associated with this level of production are:
During August, the factory worked only 640 direct labor-hours and produced 1,600 sets of covers. The following actual costs were recorded during the month:
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.
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 1,030 hours each month to produce 2,060 sets of covers. The standard costs associated with this level of production are:
Explanation / Answer
Material price variance = ( Actual price - Standard price ) x Actual quantity consumption
= ( Total material price / total actual material consumed - standard material cost / standard material consumption ) x Actual consumption.
= ( $29920 / 5500 yards - $39140 / 2.5 yards * 2060 seat covers )x 5500 yards
= ($5.44-$7.60) x5500
= $ 11880 F -favourable since actual price is less than standard price.
Material usage variance = (Actual usage - Standard usage ) x Standard price.
= ( 5500 yards - 2.5 yards x 2060 seat covers ) x $39140/ 2.5 yards x 2060 seat covers
= ( 5500 -5150) x $7.6
= $ 2660 - U -unfavourable since actual consumption is higher than standard usage.
Labour rate variance = ( Actual rate - Standard rate ) x Actual labour hours
= ($7520/640 labour hours - $9270/1030 labour hours) x 640 labour hours
=( $11.75 - $ 9) x 640
= $1760 U- unfavourable since actual rate is higher than standard rate
Labour efficiency variance = ( Actual hours - Standard hours ) x Standard rate
= (640 hours - 1030 hours) x $9270 / 1030 hours
= 390 x $ 9
= $3510- F -favourable since actual hours is less than standard hours.
overhead rate variance = ( Actual rate -standard rate)x Actual labour hours
= ( $ 4000 / 640 - $3502/ 1030 ) x 640 hours
= ($ 6.25 - $3.40) x 640 hours
= $2.85 x 640 hours
=$1824 U - unfavourable since actual rate is higher than standard rate
overhead efficiency variance = ( Actual labour hours -Standard labour hours ) x Standard rate
= ( 640- 1030) x $3502 / 1030 hours
= 390 x $ 3.40
= $1326 -F-favourable variance since actual hours is less than standard hours.
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