Question

Problem 10-9 Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3]

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:

	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

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:

	Total		Per Set of Covers
Direct materials (3,900 yards)	$	19,500	$	13.00
Direct labor	$	6,600		4.40
Variable manufacturing overhead	$	4,800		3.20
			$	20.60

At standard, each set of covers should require 1.8 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.)

Answer 1

Answer 9750 F 9000 U 1350 0 Mateial Price Variance (AQ*AP)-(AQ*SP) Matrial Quanity Varaince (AQ*SP)-(SQ*SP) Labor rate Variance (AH*AR)-(AH*SR) labor Efficiency Varaince (AH*SR)-(SH*SR) Overhead Rate Variance (AH*AR)-(AH*SR) Overhead Efficiency Varaince (AH*SR)-(SH*SR) 1050 F 1800 U 600 F

AQ Data Direct Material Standard Price (13.5/1.8) SP 7.50 Per Yard Standard quantity Per unit 1.8 Yards Standard Quantity for Actual Output SQ 2700 Yards Actual Output 1500 Units Actual Quantity Purchased AQP 3900|Yards Actual Quanity Used 3900 Yards Actual Price of Material AP 15.00 Per Yard Direct Labor Standard Rate(8610/1230) SR 7 Per hour Standard hours per unit (1230/2050) 0.6 hours Standard Hours for Actual output SH 900 Hours Actual Output 1500 Units Actual hours Worked 750 hours Actual Rate (10080/1050) AR 8.80 Per hour Varaible OH Standard Rate(4920/1230) SR 4.00 Per hour Standard hours per unit (1230/2050) 0.60 hours Standard Hours for Actual output SH 900 Hours Actual Output 1500 Units Actual hours Worked AH 750 hours Actula Rate = ( 4800/750) AR 6.40 Per hour AH