Marve\" Parts, Inc. mandxt,us auto aocessones oe of the company s products set o

Question

Marve" Parts, Inc. mandxt,us auto aocessones oe of the company s products set of sid covers tot can be a autod toreaty ary sn al car The company has stanard oost systern use sor zlof prodots According to slandrds that have been set for the seest owers, tho factory tho work 900 hours each month to produce 1,980 sets of covers The standard oosts assooated with thes lovell ef Set Tota of Covers 45,738 $23 0 6,930 350 3,160 100 $20 20 (arsed on deedt labor hours) Duning Agusd, the lacdory worked only 1,000 drect laboe hours and produced 2,500s f covers The ollowig actual costs wore reconded during the month otal of Covers Deroct matorials (30,000 yards) Drect labor Variable manufacturing ovesrheasd 5600 $22 40 %9250 370 4,500 180 $27.90 Al standard, oach set of covers should nequire 3 30 yards of material All of the materials purchased during he monh were used in producion Required 1 Compule the matenials price and quanity vriances for August input all amounts as positive values idicatethe-ct of each variance by Seleeing .F' for favorable·W" for urfavorible. None" for no efflect (ie, zero varlancel. Matonals 2 Compute the labr sade and effickency variances for August (Input all amounts as positive values Indicate the efflect of each variance by selecting "F" for favorable, "U" for unfavorable, and ione" for no effect (ie, zero variance). ) Labor effiooncy varance 3 Compute the variatio ovchead rale and efficioncy variances tor Augusl. (Iinput all amounts as for favorable, "U for positive values Indicate the effect of each variance by selecting" unfavorable, and one" for no effect e, zero variance)) Vaniable ovarhead eficency viriance

Explanation / Answer

1 Direct material variances Direct material price variance $14000 F (AQ x AR) - (AQ x SR) = (10000 x $5.60) - (10000 x $7) = $56000 - $70000 = $14000 AR = $56000/10000 yards = $5.6 SR = $45738 / (1980 X 3.30 yards) = $45738 / 6534 = $7 Direct material quantity variance $12250 U (AQ x SR) - (SQ x SR) = (10000 x $7) - (8250 x $7) = $70000 - $57750 = $12250 SQ = 2500 sets x 3.30 yards = 8250 yards 2 Direct labor variances Direct labor rate variance $2250 U (AH x AR) - (AH x SR) = (1000 x $9.25) - (1000 x $7) = $9250 - $7000 = $2250 AR = $9250 / 1000 hours = $9.25 per hour SR = $6930 / 990 hours = $7 per hour Direct labor efficiency variance $1750 F (AH x SR) - (SH x SR) = (1000 x $7) - (1250 x $7) = $7000 - $8750 = $1750 SH = (990 hours / 1980 sets) x 2500 sets = 0.5 x 2500 = 1250 hours 3 Variable overhead variances Rate variance $1300 U (AH x AR) - (AH x SR) = (1000 x $4.50) - (1000 x $3.20) = $4500 - $3200 = $1300 AR = $4500 / 1000 hours = $4.50 SR = $3168 / 990 hours = $3.20 per hour Efficiency variance $800 F (AH x SR) - (SH x SR) = (1000 x $3.20) - (1250 x $3.20) = $3200 - $4000 = $800

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