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 1,035 hours each month to produce 2,070 sets of covers. The standard costs associated with this level of production are:

	Total		Per Set of Covers
Direct materials	$	31,878	$	15.40
Direct labor	$	6,210		3.00
Variable manufacturing overhead (based on direct labor-hours)	$	4,347		2.10
			$	20.50

During August, the factory worked only 500 direct labor-hours and produced 1,700 sets of covers. The following actual costs were recorded during the month:

	Total		Per Set of Covers
Direct materials (5,000 yards)	$	25,500	$	15.00
Direct labor	$	5,440		3.20
Variable manufacturing overhead	$	4,080		2.40
			$	20.60

At standard, each set of covers should require 2.0 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.

Answer 1

Direct Material Standard Price (15.40/2) Standard quantity Per unit Standard Quantity for Actual Output Actual Output Actual Quantity Purchased Actual Quanity Used Actual Price of Material (31878/2070) SP 7.70 Per Yard 2 Yards 3400 Yards SQ 1700 Units 5000 Yards 5000 Yards AQР AQ 5.10 Per Yard АР Direct Labor Standard Rate (6210/1035) Standard hours per unit (1035/2070) Standard Hours for Actual output Actual Output Actual hours Worked Actual Rate (5440/500) 6 Per hour SR 0.5 hours 850 Hours 1700 Units 500 hours SH АН 10.88 Per hour AR. Varaible OH Standard Rate(4347/1035) Standard hours per unit (1035/2070) Standard Hours for Actual output Actual Output Actual hours Worked Actula Rate (4080/500) 4.20 Per hour SR. 0.50 hours 850 Hours 1700 Units 500 hours SH АН 8.16 Per hour AR.

Answer Mateial Price Variance (AQ*AP)-(AQ*SP) Matrial Quanity Varaince (AQ*SP)-(SQ SP) 13000 F 12320 U Labor rate Variance 2440 U (AH*AR)-(AH*SR) labor Efficiency Varaince 2100 F H*SR)-(SH*SR) Variable Overhead Rate Variance (AH*AR)-(AH SR) Variable Overhead Efficiency Varaince (AH SR)-(SH SR) 1980 U 1470 F