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 2,850 hours each month to produce 1,900 sets of covers. The standard costs associated with this level of production are Per Set Direct materials Direct labor Variable manufacturing overhead Total of Covers $ 42,560 $22.40 $17,100 9.00 (based on direct labor-hours) $ 6,840 3.6 $35.00 During August, the factory worked only 2,800 direct labor-hours and produced 2,000 sets of covers. The following actual costs were recorded during the month Per Set Total of Covers Direct materials (12,000 yards) Direct labor Variable manufacturing overhead $ 45,600 $22.80 $ 18,200 9.10 $ 7,000 3.50 $35.40

Explanation / Answer

Req 1: Std material required per unit of production 5.60 yards per unit Std price per yard ( 22.40 /5.6 ) = $4 per yard Actual production = 2000 sets Std Qty required for Actual production ( 2000*5.60) = 11,200 yards Actual Qty of yards used = 12,000 yards Actual price per yard ( 45600/12,000) = $ 3.80 per yard Material price Variance = Actual Qty consumed (Std price per yard - Actual price per yard) 12000 ( 4 -3.80 ) = $ 2400 favorable Material Qty variance = Std price per yard (Std qty required - ActualQty consumed) 4 ( 11200 -12000 ) = $ 3,200 unfavorable Req 2: Std labour hour per unit of production (2850/1900) =1.50 hour per set Std rate per hour (17100 /2850) = $ 6 per hour Std labour hours allowed for actual production ( 2000*1.5) = 3000 hours Actual Labour hours used = 2800 labour hours Actual rate per hour (18200/2800) = $ 6.50 per hour Labour rate variance = Actual labour hours (Std rate per hour- Actual rate per hour ) 2800 (6.00-6.50) = $ 1400 unfavorable labour Efficiency variance= Std rate per hour (Std hours allowed- Actual hours used) 6.00( 3000-2800) = $ 1,200 favorable Req 3: Std labour hours allowed for actual production = 3000 hours Std variable overhead rate (6840/2850) = $ 2.40 per hour Actual variable overhead rate epr hour (7000/2800) = $ 2.50 per hour Actual labour hours = 2800 hours Variable overhead rate variance= Actual labour hours(Std variable overhead rate per hour- Actual overhead rate per hour ) 2800 ( 2.40 -2.50) = $ 280 unfavorable' Variable Efficiency variance= Std variable overhead rate per hour (Std hours allowed- Actual hours used) 2.40 ( 3000 -2800 ) = $ 480 favorable

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