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 1,055 hours each month to produce 2,110 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 2,100 sets of covers. The following actual costs were recorded during the month:

At standard, each set of covers should require 3.0 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.

(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Total Per Set
of Covers Direct materials $ 51,273 $ 24.30 Direct labor $ 10,550 5.00 Variable manufacturing overhead (based on direct labor-hours) $ 4,853 2.30 $ 31.60

Explanation / Answer

Req 1: Std material required per unit of ouput 3 yards Actual ouput 2100 sets of cover Std material required for actual ouput = 6300 yards Std price per yard (24.10/3) = $ 8.10 per yard Actual Qty consumed =6800 yards Actual price per year (49980/6800) = $ 7.35 per yard Material price variance = Actual Qty consumed (Std price per yard - Actual price per yard) 6800 (8.10-7.35 ) = $ 5,100 fav material Qty variance = Std price per yard (Std qty required- Actual qty consumed) 8.10 ( 6300 -6800 ) = $ 4,050 unfav Req 2: Std labour hour required per unit of output (1055/2110) = 0.5 hours per unit Std labour hours for actual output (2100*0.5) = 1050 hours Std rate per hour = $ 10 (10550/1055) Actual labour hours used = 1000 hours Actual rate per hour (10920/1000 ) = $ 10.92 per hour Labour rate variance = Actual hours worked (Std rate per hour - Actual rate per hour ) 1000 ( 10 -10.92 ) = $ 920 unfav Labour Efficiency variance= Std rate per hour (Std hors -Actual hours) 10 ( 1050-1000) = $ 500 fav Req 3: Std labour hours allowed 1050 hours Std variable overhead rate per hour (4853/1055) = $ 4.60 per hour Actual labour hours 1000 hours Actual variable overhead rate per hour (5460/1000) = $ 5.46 per hour Variable overheads Rate variance = Actual labour hours (Std variable overhead rate per hour - Actual rate per hour )                      1000 ( 4.60 -5.46 ) = $ 860 unfav Variable overhead efficiency variance = Std rate per hour (Std labour hours- Actual labour hours) 4.60 ( 1050 -1000) = $230 fav

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