Problem 10-9 Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3] Marvel Par

Question

Problem 10-9 Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3] 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 1,045 hours each month to produce 2,090 sets of covers. The standard costs associated with this level of production are Per Set Direct materials Direct labor Variable manufacturing Total of Covers $49,533 $23.70 $10,450 5.00 overhead (based on direct labor-hours) $ 4,5982.20 $30.90 During August, the factory worked only 800 direct labor-hours and produced 1,900 sets of covers. The following actual costs were recorded during the month Per Set Total of Covers $44,460 $23.40 $ 9,880 5.20 $ 4,560 2.40 Direct materials (6,500 yards) Direct labor Variable manufacturing overhead $31.00 At standard, each set of covers should require 3.00 yards of material. All of the materials purchased during the month were used in production

Explanation / Answer

Answer 1 Material price variance = Actual quantity * (Actual price - Standard price) Material price variance = 6500 * (7.80 - 7.90) = -$650 F Material Quantity variance = Standard price * (Actual Quantity - standard quantity) Material Quantity variance = 7.90 * (6500 - 5700) = $6320 UF Answer 2 Labour rate variance = Actual hours * (Actual rate - standard rate) Labour rate variance = 800 hours * (12.35 - 10) = $1880 UF Labour efficiency variance = Standard rate *(Actual hours - standard hours) Labour efficiency variance = 10 *(800 - 950) = -$1500 F Answer 3 Variable overhead rate variance =Actual hours *(Actual rate - standard rate) Variable overhead rate variance =800 hours *(5.70 - 4.40) = $1040 UF Variable overhead Efficiency variance = standard rate *(Actual hours - Standard hours) Variable overhead Efficiency variance = 4.40 *(800 - 950) = -$660 F

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