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 1,230 hours each month to produce 2,050 sets of covers. The standard costs associated with this level of production are:

  

During August, the factory worked only 750 direct labor-hours and produced 1,500 sets of covers. The following actual costs were recorded during the month:

At standard, each set of covers should require 1.80 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).)

2. 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).)

3. 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 var

Total Per Set
of Covers Direct materials $ 27,675 $ 13.50 Direct labor $ 8,610 4.20 Variable manufacturing overhead
(based on direct labor-hours) $ 4,920 2.40 $ 20.10

Explanation / Answer

Material Price Variance (Standard Price - Actual Price) X Actual Quantity Consumed = [(13.5/1.8) - (19,500/3,900)] X 3,900 Yards = [7.5 - 5] X 3,900 Yards = 9,750 Favourable Material Quantity Variance (Standard Quantity for Actual Output - Actual Quantity) X Standard Price = [(1500 x 1.8) - 3900] X (13.50/1.8) = [2700 - 3900] X 7.5 = 9,000 Unfavourable Labour Rate Variance (Standard rate - Actual rate) X Actual Hours = [(8,610/1230) - (6,600/750)] X 750 hours = [7.00 - 8.8] X 750 hours = 1,350 Unfavourable Labour Efficieny Variance (Standard Hours for Actual Output - Actual Hours worked ) X Standard rate = [(1500X1230/2050) - 750] X 7 = [(900 - 750] X 7 = 1,050 Favourable Variable Overhead rate Variance (Standard rate - Actual rate) X Actual Hours Worked = [(4920/1230) - (4800/750)] X 750 hours = [4 - 6.4] X 750 hours = 1800 Unfavourable Variable Overhead efficeinecy Variance (Standard Hours - Actual Hours worked ) X Standard rate = [(1500X1230/2050) - 750] X 4 = [900 - 750] X 4 = 600 Favourable

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