Question

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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 1980 sets of covers. The standard costs associated with this level of production are as follows: Total $ 39,798 $ 5,940 Per Set of Covers $20.10 3.00 Direct materials Direct Labour Variable manufacturing overhead (based on direct labour-hours) $ 3,168 1.60 $24.70 During August, the factory worked only 1000 direct labour-hours and produced 2,200 sets of covers. The following actual costs were recorded during the month: Per Set of Covers $18.50 3.70 Total $ 40,70 $ 8.140 Direct materials (7.400 yards) Direct labour Variable manufacturing overhead $ 3,95 At standard, each set of covers should require 3.00 yards of material. All of the materials purchased during the month were used in production

Answer 1

1.	Standard price of materials per yard = Standard direct materials per set of covers / Standard quantity of materials per set of covers = 20.10 / 3	6.7
	Actual materials rate per yard = Actual total materials cost / Actual materials quantity = 40700 / 7400	5.5
	Materials price variance = ( Actual price - Standard price ) * Actual quantity = ( 5.5 - 6.7 ) * 7400	8880	F
	Standard quantity of materials for 2200 sets of covers = 2200 * Standard quantity of materials per set of covers = 2200 * 3	6600
	Materials quantity variance = ( Actual quantity - Standard quantity ) * Standard price = ( 7400 - 6600 ) * 6.7	5360	U
2.
	Standard labor hours per sets of cover = Standard hours for 1980 sets of covers / 1980 = 990 / 1980	0.5
	Standard rate of labor = Standard direct labor per set of cover / Standard labor hours per sets of covers = 3 / 0.5	6
	Actual rate of labor = Actual total direct labor cost / Actual direct labor hours worked = 8140 / 1000	8.14
	Labor rate variance = ( Actual rate - Standard rate ) * Actual hours = ( 8.14 - 6 ) * 1000	2140	U
	Standard direct labor hours for 2200 sets of covers = 2200 * Standard labor hours per sets of covers = 2200 * 0.5	1100
	labor efficiency varaince = ( Actual hours - Standard hours ) * Standard rate = ( 1000 - 1100 ) * 6	600	F
3.
	Standard rate of variable overhead = Standard cost of variable overhead per sets of cover / Standard labor hours per sets of cover = 1.60 / 0.5	3.2
	Actual rate of variable overhead = Actual total variable overhead cost / Actual direct labor hours worked = 3960 / 1000	3.96
	Variable overhead rate variance = ( Actual rate - Standard rate ) * Actual hours = ( 3.96 - 3.2 ) * 1000	760	U
	Variable overhead efficiency variance = ( Actual hours - Standard hours ) * Standard rate = ( 1000 - 1100 ) * 3.2	320	F