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 2,850 hours each month to produce 1,900 sets of covers. The standard costs associated with this level of production are Per Set Total of Covers Direct materials Direct labor Variable manufacturing overhead $ 42,560 $22.40 $ 17,100 9.00 S 6,840 3.60 $35.00 riable manufacturing overhea (based on direct labor-hours) During August, the factory worked only 2,800 direct labor-hours and produced 2,000 sets of covers. The following actual costs were recorded during the month Per Set Total of Covers Direct materials (12,000 yards) Direct labor $ 45,600 $22.80 $ 18,200 9.10 $ 7,000 3.50 Variable manufacturing overhead $35.40 At standard, each set of covers should require 5.6 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. (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.)

Explanation / Answer

*$45,600 ÷ 12,000 yards = $3.80 per yard

*2850 standard hours ÷ 1,900 sets = 1.5 standard hour per set,

$9.00 standard cost per set ÷ 1.5 standard hours per set = $6 standard rate per hour.

**2,000 sets × 1.5 standard hours per set = 3,000 standard hours.

Variable overhead efficiency variance = SR (AH SH)

Materials price variance = AQ (AP SP) 12,000 yards ($3.80 per yard* $4.00 per yard) = $2,400 F

*$45,600 ÷ 12,000 yards = $3.80 per yard

*$22.40 ÷ 5.60 yards = $4.00 per yard **2,000 sets × 5.60 yards per set = 11,200 yards Materials quantity variance = SP (AQ SQ) $6.60 per yard (12,000 yards 11,200 yards) = $5,280 U

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