Marvel Parts, Inc., manufactures auto accessories. One of the company’s products
ID: 2590766 • 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:
During August, the factory worked only 1,000 direct labor-hours and produced 2,200 sets of covers. The following actual costs were recorded during the month:
At standard, each set of covers should require 3.0 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 variance). Input all amounts as positive values.)
Total Per Setof Covers Direct materials $ 39,798 $ 20.10 Direct labor $ 5,940 3.00 Variable manufacturing overhead (based on direct labor-hours) $ 3,168 1.60 $ 24.70
Explanation / Answer
Answer to 1, 2 and 3
Direct Material Price Variance = (Standard Rate - Actual Rate) x Actual Quantity Used = ( 6.7 - 5.5) x 7400 = 8880 Fav Standard Rate per yard = total standard cost / total standard quantity = 39798 / (1980 x 3) = 6.7 per yard Actual Material Price Per Yard = Total Cost / total quantity = 40700 / 7400 = 5.5 per yard Direct Material Quantity Variance = (Standard Quantity - Actual Quantity) x Standard Rate = ( 3 x 2200 - 7400) x 6.7 = 5360 Unfav Direct Labor Rate Variance = (Standard Rate - Actual Rate) x Actual Hours = [6 - 8.14] x 1000 = 2140 Unfav Standard Rate per hour = standard cost / standard hours = 5940 / 990 = 6 per hour Actual labor Price Per hour = Total Cost / total hours = 8140 / 1000 = 8.14 per hour Direct Labor Efficiency Variance = (Standard Hours- Actual Hours) x Standard Rate = [2200 x 0.5 - 1000] x 6 = 600 Fav Standard Hours per unit = total standard hours / total standard units = 990 / 1980 = 0.5 per unit Variable Overhead Spending Variance = (Standard Rate - Actual Rate) x Actual Hours = [3.2 -3.96 ] x 1000 = 760 Unfav Standard Rate per hour = standard cost / standard hours = 3168 / 990 = 3.2 per hour Actual labor Price Per hour = Total Cost / total hours = 3960 / 1000 = 3.96 per hour Variable Overhead Efficiency Variance = (Standard Hours- Actual Hours) x Standard Rate = [2200 x 0.5 - 1000] x 3.2 = 320 FavRelated Questions
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