Problem 10-9 Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3] Marvel Par

Question

Problem 10-9 Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3]

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 990 hours each month to produce 1,980 sets of covers.

The standard costs associated with this level of production are: Total Per Set of Covers Direct materials $ 39,798 $ 20.10 Direct labor $ 5,940 3.00 Variable manufacturing overhead (based on direct labor-hours) $ 3,168 1.60 $ 24.70 During August, the factory worked only 1,000 direct labor-hours and produced 2,200 sets of covers. The following actual costs were recorded during the month: Total Per Set of Covers Direct materials (7,400 yards) $ 40,700 $ 18.50 Direct labor $ 8,140 3.70 Variable manufacturing overhead $ 3,960 1.80 $ 24.00 At standard, each set of covers should require 3.0 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.)

Explanation / Answer

For Output of 1980 990 Hours Needed Hour per Seat Cover 0.50 (990/1980) Material Price Variance (Standard Price-Actual Price)Actual Qty Production Costs: Standard Qty Standard Price Total PU Cost (6.70-5.50)*7400 Direct Material 3.00 6.70 20.10 (20.10/3) 8880 Favourable Direct Labor 0.50 6.00 3.00 (3/0.5) Variable FOH 0.50 3.20 1.60 (1.6/0.5) Material Quantity Variance Total 24.70 (Standard Qty-Actual Qty)Standard Price Actual Units 2200 (6600-7400)6.70 Standard Cost for Actual Units: -5360 Unfavourable Production Costs: Standard Qty Standard Price Total Direct Material 6,600 6.70 44,220 Labor Price Variance Direct Labor 1,100 6.00 6,600 (Standard Price-Actual Price)Actual Hours Variable FOH 1,100 3.20 3,520 (6.00-8.14)*1000 Total 54,340 -2140 Unfavourable Actual Data: Labor Efficiency Variance Production Costs: Actual Qty Actual Price Total PU Cost (Standard Hour-Actual Hour)Standard Price Direct Material 7,400 5.50 40,700 (40700/7400) (1100-1000)6.00 Direct Labor 1,000 8.14 8,140 8140/1000 600 Favourable Variable FOH 1,000 3.96 3,960 3960/1000 Total 52,800 Variable OH Price Variance (Standard Price-Actual Price)Actual Hours (3.20-3.96)*1000 -760 Unfavourable Variable OH Efficiency Variance (Standard Hour-Actual Hour)Standard Price (1100-1000)3.20 320 Favourable

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