Using Standard Costs—Direct Labor Variancesopens in a new window, Direct Materia

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Using Standard Costs—Direct Labor Variancesopens in a new window, Direct Materials Variancesopens in a new window, Variable Manufacturing Overhead Variances. (Please show work, thank you!)

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 1,010 hours each month to produce 2,020 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 S 36, 360 s 7,070 $18.00 3.50 1.50 $23.00 (based on direct labor-hours) s 3,030 During August, the factory worked only 1,080 direct labor-hours and produced 2,700 sets of covers. The following actual costs were recorded during the month Per Set Total of Covers Direct materials (8,100 yards) Direct labor Variable manufacturing overhead S46,980 $17.40 3.70 1.70 $22.80 s 9,990 S 4,590 At standard, each set of covers should require 2.0 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

Explanation / Answer

                                = 8,100 (9 - 5.8)

                                = 25,920 favourable

Note : ( 46,980/8100 = 5.8 :: 2020 covers*2 yards = 4040, 36,360/4040 = 9)

Material Quantity Variance

= (Actual quantity used - Standard quantity used) x Standard cost per unit

= (8,100 – 4,040)*9

= 36,540 Favourable

                                             = 1080 ( 9.25 – 7)

                                             = 2,430 Unfavourable.

2. Labour Efficiecy Variance=Standard Rate(Standard Hours-Actual Hours)

                                            =7(1010-1080)

                                           =490Unfavourable

3.Vairable Overhead Rate Variance= Actual Hours(Standard VOH rate-Actual VOH rate).

                                                  =1080(3-4.25)

                                                     =1350Unfavourable

4.Variable Overhead Efficiency Variance=Standard VOH rate(Standard hours-Actual hours

                                                        =3(1010-1080)

                                                         =210 Unfa

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