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. Acconding 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 Totalof Covers Direct materials Direct labor Variable manufecturing overhead pased on direct labor-hours) 31,878 $15.40 3.00 6,210 S 4,347 2.10 20.50 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 Sat Total of Covers Direct materials (5,000 yards) Direct labor Variable manufacturing overhead 25,500 $15.00 3.20 s 5,440 4,080 $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 "F" for favorable, "U for unfavorable, and "None" for no effect (i.e, zero variance)) Materials price variance Materials quantity variance

Explanation / Answer

Material Price Variance (Standard Price - Actual Price) X Actual Quantity consumed = [(31878/4140) - (25500/5000)] X 5000 = [7.7 - 5.1] X 5000 =13,000 Favourable Material Quantity Variance (Standard Quantity for Actual Output - Actual Quantity) X Standard Price = [(1700X2) - 5000] X 7.7 = 12,320 Unfavourable

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