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 1,010 hours each month to produce 2,020 sets of covers. The standard costs associated with this level of production are: Direct materials Direct labor Variable manufacturing overhead (based on direct labor-hours) Total S 36.360 $ 7,070 Per Set of Covers $18.ee 3.50 $ 3,030 1.50 $23.ee During August, the factory worked only 1,080 direct labor-hours and produced 2,700 sets of covers. The following actual costs were recorded during the month: Direct materials (8,100 yards) Direct labor Variable manufacturing overhead Total $ 46,989 $ 9,99€ $ 4,590 Per Set of Covers $17.40 3.70 1.70 $22.80

Answer 1

1) Material price variance = (9*8100-46980) = 25920 F

Material quantity variance = (2700*2-8100)*9 = 24300 U

2) Labor rate variance = (7*1080-9990) = 2430 U

Labor efficiency variance = (1350-1080)*7 = 1890 F

3) Variable overhead rate variance = (3*1080-4590) = 1350 U

Variable overhead efficiency variance = (1350-1080)*3 = 810 F