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 hat 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 1,055 hours each month to produce 2,110 sets of covers. The standard costs associated with this level of production are: $51,273$24.30 Direct materials Direct labor Variable manufacturing overhead $10,550 5.00 $ 4,8532.30 $31.60 based on direct labor-hours) During August, the factory worked only 1,000 direct labor-hours and produced 2,100 sets of covers. The following actual costs were recorded during the month: Per Set Total of Covers Direct materials (6,800 yards) Direct labor Variable manufacturing overhead $ 49,980 $23.80 $ 10,9205.20 $ 5,4602.60 $31.60 Atstandard each set of covers should require 300 yards of material. ll of the materials purchased during the month were used in production Required: 1 Compute the materials price and quantity variances for August. Onput all amounts as positive values Indicate the effect of each variance by selectingE for favorable, "U for unfavorable, and

Explanation / Answer

1) Material price variance = (8.1*6800-49980) = 5100 F

Material quantity variance = (2100*3-6800)*8.1 = 4050 U

2) Labour rate variance = (10*1000-10920)= 920 U

Labour efficiency variance = (2100*.50-1000)*10 = 500 F

3) Variable overhead rate variance = (4.6*1000-5460) = 860 U

Variable overhead efficiency variance = (1050-1000)*4.6 =230 F

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