Marvel Parts, Inc., manufactures auto accessories. One of the company’s products

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:

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:

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.

Total Per Set
of Covers Direct materials $ 37,740 $ 18.50 Direct labor $ 9,180 4.50 Variable manufacturing overhead (based on direct labor-hours) $ 2,448 1.20 $ 24.20

Explanation / Answer

Standard Cost Sheet PU Component Qty Rate Price Direct Material 2.5 7.40 18.5 Direct Labor 0.5 9.00 4.5 Seat Cover 2040 Variable OH 0.5 2.40 1.2 Hours 1020 24.2 Hour PU 0.5 Actual Cost Component Qty Rate Price Direct Material 9100 5.80 52780 Seat Cover 2900 Direct Labor 1000 13.63 13630 Hours 1000 Variable OH 1000 4.64 4640 Hour PU 0.34 Total 71050 Revised Standard Cost (2900) Component Qty Rate Price Material 7250 7.40 53650 Labor 1450 9.00 13050 VOH 1450 2.40 3480 Total 70180 A Material Price Variance: F/A (SP-AP)Actual Qty Consumed 14560 F A1 Material Usage Variance: (SQ-AQ)SP -13690 A B Labor Price Variance: (SP-AP)Actual Hours -4630 A B1 Labor Eff Variance: (SH-AH)SP 4050 A C VOH Price Variance: (SP-AP)Actual Hours -2240 A C1 VOH Eff Variance: (SH-AH)SP 1080 F

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