Marvel Parts, Inc., manufactures auto accessories. One of the company’s products
ID: 2490635 • 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 1,020 hours each month to produce 2,040 sets of covers. The standard costs associated with this level of production are:
During August, the factory worked only 1,000 direct labor-hours and produced 2,900 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 1,020 hours each month to produce 2,040 sets of covers. The standard costs associated with this level of production are:
Explanation / Answer
1)
Direct material price variance
= (Actual price - standard price) x Actual quantity purchased
= ($52780/9100 yards - $18.50/2.50 yards) x 9100 yards
=($5.80 - $7.40) x 9100
= $14560 Favourable
Material Quantity variance
= (Actual quantity used - standard quantity allowed) x Standard price
= (9100 yards - 2900 set x 2.50 yard/set) x $7.40/yard
=$13690 Unfavourable
2)
Direct labour rate variance
= (actual rate - standard rate) x Actual labour hours used
= ($13630/1000 hours - $9180/1020 hours) x 1000 hours
= ($13.63 - $9) x 1000
= $4630 Unfavourable
Standard hour per set = 1020hours/2040set = 0.50 hours per set
Labour Efficiency variance
= (actual hours worked - standard hours allowed) x standard rate
= (1000 hours - 2900 sets x 0.50 hr/set) x $9/hour
= $4050 Favourable
3)
standard variable overhead rate = $2448 / 1020 hours = $2.40 / hour
Actual variable overhead rate = $4640 / 1000 = $4.64 per hour
Variable overhead rate variance
= (actual rate - standard rate) x Actual hours worked
= (4.64 - 2.40) x 1000
= $2240 Unfavourable
Variable overhead efficiency variance
= (actual hours worked - standard hours worked) x standard variable overhead rate
= (1000 - 0.50 x 2900) x 2.40
= $1080 Favourable
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