Marvel Parts, Inc., manufactures auto accessories. One of the company’s products
ID: 2586323 • 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 1,045 hours each month to produce 2,090 sets of covers. The standard costs associated with this level of production are:
During August, the factory worked only 800 direct labor-hours and produced 1,900 sets of covers. The following actual costs were recorded during the month:
At standard, each set of covers should require 3.00 yards of material. All of the materials purchased during the month were used in production.
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).)
Compute the labor rate and efficiency 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).)
Compute the variable overhead rate and efficiency 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).)
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 1,045 hours each month to produce 2,090 sets of covers. The standard costs associated with this level of production are:
Explanation / Answer
Req 1: Std Material cost for 2090 sets of output = $ 49,533 Std material required per unit of output = 3 yards Std material required for 2090 sets (2090*3) = 6270 yards Std Price per yard ( 49533/6270) = $ 7.90 per yard Actual Output = 1900 sets Std material required for actual output ( 1900*3) = 5,700 yards Actual Material Quantity used = 6500 yards Actual price per yard = (44,460 /6500) = $6.84 pre yard Material Price Variance = Actual Qty consumed (Std price per yard- Actual price per yard) ( 6500 yards ( $ 7.90 -$ 6.84 )) = $ 6,890 F Material Quantity variance= Std Price per yard (Std Quantity for actual output- Actual Quantity Consumed) ( 7.90 (5700- 6500) )= $ 6,320 U Req 2: Actual Output= 1900 sets Std labour hours required per unit of output (1045/2090) = 0.50 hours per unit Std Labour hours required for actual output (1900 *0.50) = 950 hours Std labour rate per hour ( 10450 /1045 hrs) = $ 10 per hour Actual labour hours worked = 800 hours Actual labour rate per hour (9880/800) = $12.35 per hour Labour rate variance = Actual labour hours (Std rate per hour - Actual rate per hour ) ( 800 hours ( 10 -12.35 ) ) = $ 1,880 U Labour Efficiency variance = Std Rate per hour (Std labour hours - Actual labour hours) ( 10 ( 950-800) ) = $ 1500 F Req 3: Actual Output= 1900 sets Std hours required per unit of output (1045/2090) = 0.50 hours per unit Std hours required for actual output (1900 *0.50) = 950 hours Std Variable overhead rate per hour ( 4598 /1045 hrs) = $ 4.40 per hour Actual hours worked = 800 hours Actual Variable overhead rate per hour (4560/800) = $5.70 per hour Variable overhead rate variance = Actual hours (Std rate per hour - Actual rate per hour ) ( 800 hours ( 4.40-5.70 ) ) = $ 1,040 U Variable overhead Efficiency variance = Std Rate per hour (Std hours - Actual hours) ( 4.40 ( 950-800) ) = $ 660 F
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