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 1,020 hours each month to produce 2,040 sets of covers. The standard costs associated with this level of production are Per Set of Direct materials Direct labor Variable manufacturing Total Covers $37,740 $18.50 $ 9,180 4.50 overhead (based on direct labor-hours) $ 2,448 1.2(0 $24.20 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 Per Set of Direct materials (9,100 yards) Direct labor Variable manufacturing overhead Total Covers $52,780 $18.20 $13,630 4.70 4,640 1.60 $24.50 At standard, each set of covers should require 2.5 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 "F"for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) 1.Materials price variance Materials quantity variance 2. Labor rate variance Labor efficiency variance Variable overhead rate variance Variable overhead efficiency variance

Explanation / Answer

1. Materials price variances = (Standard rate - actual rate) x Actual quantity
= {($18.50 / 2.5) - ($52,780 / 9,100)} x 9,100 = $14,560 Favorable

Materials quantity variances = (Standard quantity - actual quantity) x Standard rate
= {(2,900 x 2.5) - 9,100} x $7.40 = $13,690 Unfavorable

Labor rate variances = (Standard rate - actual rate) x Actual hours
= {($9,180 / 1,020) - ($13,630 / 1,000)} x 1,000 = $4,630 Unfavorable

Labor efficiency variances = (Standard hours - actual hours) x Standard rate
= {(1,020 / 2,040 x 2,900) - 1,000) x $9.00 = $4,050 Favorable

Variable overhead rate variances = (Standard rate - actual rate) x Actual hours
= {($2,448 / 1,020) - ($4,640 / 1,000)} x 1,000 = $2,240 Unfavorable

Variable overhead efficiency variances = (Standard hours - actual hours) x Standard rate
= {(1,020 / 2,040 x 2,900) - 1,000) x $2.40 = $1,080 Favorable

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