Problem 10-9 Comprehensive Variance Analysis [L010-1, LO10 2, LO10-3] Marvel Par

Question

Problem 10-9 Comprehensive Variance Analysis [L010-1, LO10 2, LO10-3] Marvel Parts·lnc., manufactures auto acces sones One of the company's products is a set of seat covers that can be adjusted to fit nearly any small cat. 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 990 hours each month to produce 1,980 sets of covers. The standard costs associated with this level of production are: Per Set Totalof Covers 39,798 $20 10 Direct materials Direct labor Variable manufacturing overhead s 5,940 3.00 S 3,168 1.60 $24 70 based on direct labor-hours) During August, the factory worked only 1,000 direct labor hours and produced 2,200 sets of covers. The following actual costs were recorded during the month: Per Set Total of Covers Direct materials (7.400 yards) Direct labor $ 40,700 $18 50 S 8.140 3.70 s 3,960 1.80 Vanable manufacturing overhead $24.00 At standard, each set of covers should require 3 00 yards of maternal. All of the matenals purchased duning the month were used in production Required: 1 Compute the matenals price and quantity variances for August (lndicato the ettect of each variance by selecting F for favorable, U for unfavorable, and "None" for no effoct (i.e., zereo arlance). Round your intermadiate calculations to 2 decimal places. Round "Standard Price" and Actial Price answers to 2 decimal places.) Matenals price vanance Matenals quantty varianco looks ike you heven' sarted Fiefor in anbile, De you want to clean it up ter a freseh lie looks like you hecen't stasted Ficetouin a while, De you want to clean t up tor a fresh liks new esperience? And by the way welcome b ,

Explanation / Answer

Standard hours required for produce 2,200 sets=990*220/1,980=1,100 hours

Standard material required to produce 2,200 sets=2,200*3=6,600

Standard Material cost per unit=$20.10/3=$6.7

Actual material cot per unir=$18.5*2,200/7,400=$5.5

Actual Material used=4,400 yards

Standard Direct labour cost per hour=$3/0.5=$6

Standard Variable over head per hour=$1.6/0.5=$3.2

Actual Direct labour cost per hour=$3.7*2,200/1,000=$7.4

Actual Variable over head per hour=$1.8*2,200/1,000=$3.6

1.

Direct Material price variance=AQ(SP-AP)=7,400($6.7-$5.5)=$8,880-F

Direct Material quantity variance=SP(SQ-AQ)=$6.7(6,600-7,400)=-$5,360-U

Material cost Variance=$8,880-$5,360=$3,520

2.

Labour rate variance=AH(SR-AR)=1,000($6-$7.4)=-$1,400-U

Labour efficiency variance=SR(SH-AH)=$6(1,100-1,000)=$600-F

Labour cost Variance=-$1,400+$600=-$800-U

3.

Variable expenditure variance=AH(SR-AR)=1,000($3.2-$3.6)=-$400-U

Variable efficiency variance=SR(SH-AH)=$3.2(1,100-1,000)=$320-F

Variable cost Variance=-$1,400+$600=-$80-U

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