Marvel Parts, Inc., manufactures nearly any smal been set for the seat covers, t

Question

Marvel Parts, Inc., manufactures nearly any smal been set for the seat covers, the factory should work 990 hours each month to produce 1980 sets of covers. The st associated with this level of production are: auto accessories One of the company's products is a set of seat covers that can be adjusted to ft ll car. The company has a standard cost system in use for all of its products. According to the standards that have andard costs Per Set Total of Covers Direct materials Direct labor Varlable manufacturing overhead (based on 39,798 $20.10 $ 5,940 3.00 %3,168 1.60 524.70 direct labor-hours) uin Auuoust the factory worked only 1,000 direct labor-hours and produced 2.200 sets of covers. The following actual costs

Explanation / Answer

Standard cost of: Amount Per set No. of set Derived by Direct Material 39798 20.10 1980 dividing amount from per set cost Direct labor 5940 3 1980 dividing amount from per set cost Variable manufacuring overheads 3168 1.6 1980 dividing amount from per set cost As each set requires 3 .0sq.yds of material, as per standards above, for 1980 set, 5940 sq.yds. are required This gives rate of 6.70 per sq. yard Based on standrad, this is for 990 hours means that per hour rate is 6 Labor efficiency is 990 hours for 1980 set means half an hour for each set Variable Overheads are 3.2 per hour (3168 divided by 990 hours) Actuals for August Direct material 40700 18.5 2200 dividing amount from per set cost Direct labor 8140 3.7 2200 dividing amount from per set cost Variable manufacturing overheads 3960 1.8 2200 dividing amount from per set cost During the month of August, 7400 sq. yards of material wer purchased and used for 2200 sets It means that per et consumption was 3.367 sq. yds. This gives rate of 5.50 per sq. yard. Labor rate per hour comes to 8.14 as 1000 hour were used Labor efficiency rate comes to 0.456 hour per set (1000 hrs for 2200 sets) Ovrhead efficiency rate for Aug is 3.96 per hour (3960 divided by 1000 hours) Answer: Standard Actual Variance F/U Material Price Variance 6.7 5.5 1.2 F Material Quantity Variance 3 3.367 0.367 U Labor Rate variance 6 8.14 2.14 U Labor efficiency variance 5 0.456 0.044 F Variable Overhead rate variance 1.6 1.8 0.20 U Variable Overhead efficiency variance 3.2 3.96 0.76 U

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