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 Total of Covers Direct materials Direct labor Variable manufacturing overhead $42,560 $22.40 $17,100 9.00 $ 6,840 3.60 $35.00 (based on direct labor-hours) 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 $45,600 $22.80 $18,200 9.10 $ 7,000 3.50 Variable manufacturing overhead $35.40 At standard, each set of covers should require 5.6 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. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

Explanation / Answer

Standard Actual Particulars Qty/ hours Rate amount Qty/ hours Rate amount Materials            11,200.00                      4.00            44,800.00            12,000.00                      3.80            45,600.00 Labour              3,000.00                      6.00            18,000.00              2,800.00                      6.50            18,200.00 Overhead              3,000.00                      2.40              7,200.00              2,800.00                      2.50              7,000.00 Actual output              2,000.00 Materials reqd (2000*5.6)            11,200.00 Labour hrs reqd (2850/1900 *2000)              3,000.00 Material rate = 22.4/5.6                      4.00 Labour rate = 9/1.5                      6.00 Variable overhead rate = 3.6/1.5                      2.40 DMPV = (SP-AP)*AQ purchased DMPV = (4 - 3.80)12000 DMPV = 2,400 F DMQV= (SQ-AQ)SP DMQV= (11200 - 12000)4 DMQV= 3,200 U DLRV= (SR-AR)AH DLRV= (6 - 6.5)2800 DLRV= 1,400 U DLEV = (SH-AH)SR DLEV = (3000 - 2800)6 DLEV = 1200 F VORV = (SR-AR)AH VORV = (2.40 - 2.5)2800 VORV = 280 U VOEV = (SH-AH)SR VOEV = (3000 - 2800)2.40 VOEV = 480 F

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