Marvel Parts, Inc., manufactures auto accessories. One of the company\'s product

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 1,070 hours each month to produce 2,140 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 (based $26,964 $12.60 5.50 s 11,770 1.70 $19.80 on direct labor-hours) 3,638 During August, the factory worked only 1,000 direct labor-hours and produced 2,400 sets of covers. The following actual costs were recorded during the month Per Set Total of Covers Direct materials (6,000 yards) Direct labor Variable manufacturing overhead $29,280 $12.20 5.70 2.40 13,680 $5,760 $20.30

Explanation / Answer

1) Material price variance = (8.4*6000-29280) = 21120 F

Material quantity variance = (2400*1.5-6000)*8.4 = 20160 U

2) Labour rate variance = (11*1000-13680) = 2680 U

Labour efficiency variance = (2400*.50-1000)*11 = 2200 F

3) Variable overhead rate variance = (3.4*1000-5760) = 2360 U

Variable overhead efficiency variance = (1200-1000)*3.4 = 680 F

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