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 1,035 hours each month to produce 2,070 sets of covers. The standard costs associated with this level of production are: Per Set Total of Covers Direct materials Direct labor Variable manufacturing overhead 531,878 515.40 5 6,210 3.00 S 4,3472.10 520.50 (based on direct labor-hours) During August, the factory worked only 500 direct labor-hours and produced 1,700 sets of covers. The following actual costs were recorded during the month: Per Set Total of Covers Direct materials (5,000 yards) Direct labor 25,500 $15.00 S 5,440 3.20 5 4,080 240 Variable manufacturing overhead 20.60 At standard, each set of covers should require 2.00 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. (Input all amounts as positive values. Indicate the effect of each variance by selecting .. for favorable, "U" for unfavorable, and None" for no effect (i.e, zero variance).) Materials price varian0e Materials quantity variance 2. Compute the labor rate and efficiency varianoes for August. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and None" for no effect (i.e, zero variance).) Labor rate variance Labor efficiency variance 3. Compute the variable overhead rate and efficiency variances for August. (Input all amounts as positive values. Indicate the effect of each variance by seecting 'F' for favorable."U" for unfavorable, and None" for no effect (ie, zero variance).) Variable overhead rate variance Variable overhead efficiency varance

Explanation / Answer

Standard price per yard = 15.4/2=$7.7 Standard rate per hour = 3/0.5 = $6 Variable rate per hour = 2.1/0.5 = $4.2 1 Materials price variance = 25500-(5000*7.7)= 13000 F Materials quantity variance = 7.7*(5000-1700*2)= 12320 U 2 Labor rate variance = 5440-(500*6)= 2440 U Labor efficiency variance=6*(500-1700*0.5)= 2100 F 3 Variable overhead rate variance = 4080-(500*4.2)= 1980 U Labor efficiency variance=4.2*(500-1700*0.5)= 1470 F

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