Marvel Parts, Inc., manufactures auto accessories. One of the company\'s product
ID: 2570169 • Letter: M
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 Total of Covers Direct materials Directlabor Variable manufacturing overhead (based $ 42,560 $22.40 $ 51,300 27.00 3.60 $53.00 on direct labor-hours) $ 6,840 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 $ 49,000 24.50 3.50 $50.80 $ 7,000Explanation / Answer
1)material price variance =ACtual cost -[AQ*SR]
= 45600 - [12000*4]
= 45600 -48000
= -2400 F [input as 2400]
**Standard price per yard = 22.40/5.6=4
Material quantity variance =SR[AQ-SQ]
= 4[12000-(2000*5.6)]
= 4[12000- 11200]
= 4800 U
2)Standard labour hours per unit = 2850/1900= 1.5 hours per unit
Standard rate per hour = 27/1.5= $ 18 per hour
labor rate variance =Actual cost -[AH*SR]
= 49000 - [2800*18]
= 49000 - 50400
= - 1400 F [Input as 1400]
Labor efficiency variance =SR[AH-SH]
= 18[2800-(2000*1.5)]
= 18[2800-3000]
= -3600 F [input as 3600]
3)Standard variable overhead rate =3.60/1.5 =$2.4 per hour
)Variable overhead rate variance =Actual cost -[AH*SR]
= 7000-[2800*2.4]
= 7000 - 6720
= 280 U
Variable overhead efficiency variance =SR[AH-SH]
= 2.4[2800-(2000*1.5)]
= 2.4 [2800-3000]
= -480 F [INput as 480]
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