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

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 630 hours each month to produce 2,100 sets of covers. The standard costs associated with this level of production are Direct materials Direct labor Variable manufacturing overhead (based $38,640 $18.40 6,300 3.00 on direct labor-hours) 3,150 1.50 $22.90 During August, the factory worked only 500 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 (5,000 yards) Direct 1abor 36,000 $18.00 s 6,400 3.20 2.20 $23.40 Variable manufacturing overhead 4,400 At standard, each set of covers should require 2.3 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. 2. Compute the labor rate and efficiency variances for August. 3. Compute the variable overhead rate and efficiency variances for August Indicate the effect of each variance by selecting "Ft for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance). Input all amounts as positive values.) 5 of 5 Next

Explanation / Answer

Metrial: Std quantity for actual output(2000*2.3): 4600 Sstd price per yard: $ 18.40 /2.3 = $ 8 per yard Actual quantity used: 5000 yards Actual price per yard (36000/5000)= $ 7.20 per yeard Material Price variance = Actual qty (Std price-Actual price) 5000 (8.00-7.20)= $ 4000 F Material Qty vraiannce = Std price (Std qty-Actual Qty) 8.00 (4600-5000)= $ 3200 U Labour: Std Hours allowed (2000*0.3): 600 hours Std rate per hour (6300/630): $ 10 per hour Actual hours owrked: 500 hours Actual rate per hour (6400/500): $ 12.80 per hour Labour rate variance= Actual hours (Std rate-Actual rate) 500 (10.00-12.80) = $ 1400 U Labur efficiency Variance = Std rate (Std hours-Actual hours) 10.00 (600-500)= $1000 F OH: Std hours: 600 hours Std OH rate per hour (3150/630)= $ 5 per hour Actual hours: 500 hours Actual OH rate: (4400/500)= $ 8.80 per hour Variable rate variance= Actual hours (Std ratae-Actual Rate) 500 hours (5.00 - 8.80) = $1900 U Variable Efficiency Variance= Std rate (Std Hours-Actual Hours) 5.00 (600-500)= $ 500 F

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