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10-9 6 Help Save & Exit Check my work Marvel Parts, Inc., manufactures auto acce

ID: 2517482 • Letter: 1

Question

10-9 6 Help Save & Exit Check my work Marvel Parts, Inc., manufactures auto accessories. nearly any small car. The company has a standard cost system set for the seat covers, the factory should work 630 hours each month to produce 2,100 sets of covers. The standard costs a with this level of production are: One of the company's products is a set of seat covers that can be adjusted to fit in use for all of its products. According to the standards that have been ssociated Per Total of Covers 38,640 $18.40 6,300 3.00 Direct labor Variable manufacturing overhead (based on direct labor-hours) 3,150 .50 es $22.90 During August, the factory worked only 500 direct labor-hours and produced 2.000 sets of covers. The following actual costs recorded during the month: were Per Set Total of Direct materials (5,000 yards) Direct labor Variable manufacturing overhead $36,000 $18.00 $6,400 3.20 4,400 2.20 $23.40 At standard, each set of covers should require 2.3 yards of material. All of the materials purchased during the month were used in Required: Prev 1 of Next

Explanation / Answer

1.

Standard price of material = $ 18.40/2.3 = $ 8 per yard

Actual price of material = $ 36,000/5,000 = $ 7.2 per yard

Material price variance = (Actual price – Standard price) x Actual quantity

                                          = ($ 7.2 - $ 8) x 5,000 = - $ 0.8 x 5,000 = - $ 4,000   F  

Standard Quantity of material for actual production = 2.3 x 2,000 = 4,600

Materials quantity variance = (Actual Quantity – Standard Quantity) x Standard Price

                                                  = (5,000 – 4,600) x $ 8 = 400 x $ 8 = $ 3,200    U

2.

Standard labor rate = $ 6,300/630 = $ 10 per hour

Actual labor rate = $ 6,400/500 = $ 12.80

Labor rate Variance = (Actual rate - Standard rate) × Actual hour

                             = ($ 12.80 - $ 10) x 500 = $ 2.80 x 500 = $ 1,400    U

Standard hours per unit of actual production = 630/2,100 = 0.3 hour

Standard hours for 2,000 units of actual production = 0.3 x 2,000 = 600 hour

Labor efficiency Variance = (Actual hours - Standard hours) x Standard rate

                                     = (500 – 600) x $ 10 = - 100 x $ 10 = - $ 1,000     F

3.

Actual overhead rate = Actual overhead cost /Actual labor hours = $ 4,400/500

                                      = $ 8.8

Standard overhead rate = Standard overhead cost /Standard labor hours = $ 3,150/630

                                      = $ 5

Variable overhead rate variance

= Actual hours worked x (Actual overhead rate - standard overhead rate)

= 500 x ($ 8.8 - $ 5) = 500 x $ 3.80 = $ 1,900    U

Variable overhead efficiency variance

= Standard overhead rate x (Actual hours - Standard hours)

= $ 5 x (500 – 600) = $ 5 x (– 100) = - $ 500         F