Marvel Parts, Inc., manufactures auto accessories. One of the company\'s product
ID: 2585013 • 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 990 hours each month to produce 1,980 sets of covers. The standard costs associated with this level of production are Per Set Total of Covers Direct materials Direct labor Variable manufacturing over $45,738 $23.10 $ 6,930 3.50 $ 3,168 1.60 $28.20 head (based on direct labor-hours) During August, the factory worked only 1,000 direct labor-hours and produced 2,500 sets of covers. The following actual costs were recorded during the month Per Set Total of Covers Direct materials (10,000 yards) Direct labor Variable manufacturing overhead $56,000 $22.40 $ 9,250 3.70 1.80 $ 4,500 $27.90Explanation / Answer
Standard price of materials 1980*3.3 yards*x = 45,738 x = 45738/(1980*3.3) 7 per yard Materials price variance = (AP*AQ - SP*AQ) = (56,000 - 7*10000) 14000 F Material QTY variance = (AQ- SQ)*SP = (10,000 - 2500*3.3)*7 12,250 U 990 hours / 1980 cover = .5 per standard hour per set 3.5 standard cost per set / standard hrs per set = $7 standard rate per hour standard hours allowed = 2500*.5 1250 hrs labor rate variance = (AH*AR- AH*SR) = (9,250 - 1000*7) 2250 U labor efficiency variance = ( AH- SH)*SR =(1000-1250)*7 1750 F variable overhead 1.6/.5 = 3.2 per hour Variable rate variance = 4,500 - 1000*3.2 1300 U Variable efficiency variance = (1000-1250)*3.2 800 F
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