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 1,070 hours each month to produce 2,140 sets of covers. The standard costs associated with this level of production are: Total Per Set of Covers Direct materials $ 26,964 $ 12.60 Direct labor $ 11,770 5.50 Variable manufacturing overhead (based on direct labor-hours) $ 3,638 1.70 $ 19.80
During August, the factory worked only 1,000 direct labor-hours and produced 2,400 sets of covers. The following actual costs were recorded during the month: Total Per Set of Covers Direct materials (6,000 yards) $ 29,280 $ 12.20 Direct labor $ 13,680 5.70 Variable manufacturing overhead $ 5,760 2.40 $ 20.30
At standard, each set of covers should require 1.5 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.
Answers
Actual DATA for |
2400 |
units |
|
Quantity (AQ) |
Rate (AR) |
Actual Cost |
|
Direct Material |
6000 |
$ 4.88 |
$ 29,280.00 |
Direct labor |
1000 |
$ 13.68 |
$ 13,680.00 |
Variable Overhead |
1000 |
$ 5.76 |
$ 5,760.00 |
Standard DATA for |
2400 |
units |
|
Quantity (SQ) |
Rate (SR) |
Standard Cost |
|
[A] |
[B] |
[A x B] |
|
Direct Material |
( 1.5 hours x 2400 units)=3600 hours |
$ 8.40 |
$ 30,240.00 |
Direct labor |
( 0.5 hours x 2400 units)=1200 hours |
$ 11.00 |
$ 13,200.00 |
Variable Overhead |
( 0.5 hours x 2400 units)=1200 hours |
$ 3.40 |
$ 4,080.00 |
Material Price Variance |
||||||
( |
Standard Rate |
- |
Actual Rate |
) |
x |
Actual Quantity |
( |
$ 8.40 |
- |
$ 4.88 |
) |
x |
6000 |
21120 |
||||||
Variance |
$ 21,120.00 |
Favourable-F |
||||
Material Quantity Variance |
||||||
( |
Standard Quantity |
- |
Actual Quantity |
) |
x |
Standard Rate |
( |
3600 |
- |
6000 |
) |
x |
$ 8.40 |
-20160 |
||||||
Variance |
$ 20,160.00 |
Unfavourable-U |
Labor Rate Variance |
||||||
( |
Standard Rate |
- |
Actual Rate |
) |
x |
Actual Labor Hours |
( |
$ 11.00 |
- |
$ 13.68 |
) |
x |
1000 |
-2680 |
||||||
Variance |
$ 2,680.00 |
Unfavourable-U |
||||
Labour Efficiency Variance |
||||||
( |
Standard Hours |
- |
Actual Hours |
) |
x |
Standard Rate |
( |
1200 |
- |
1000 |
) |
x |
$ 11.00 |
2200 |
||||||
Variance |
$ 2,200.00 |
Favourable-F |
Variable Overhead Rate Variance |
||||||
( |
Standard Rate |
- |
Actual Rate |
) |
x |
Actual Labor Hours |
( |
$ 3.40 |
- |
$ 5.76 |
) |
x |
1000 |
-2360 |
||||||
Variance |
$ 2,360.00 |
Unfavourable-U |
||||
Variable Overhead Efficiency Variance |
||||||
( |
Standard Hours |
- |
Actual Hours |
) |
x |
Standard Rate |
( |
1200 |
- |
1000 |
) |
x |
$ 3.40 |
680 |
||||||
Variance |
$ 680.00 |
Favourable-F |
Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat...
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 1,005 hours each month to produce 2,010 sets of covers. The standard costs associated with this level of production are: Total Per Set...
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