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 1,020 hours each month to produce 2,040 sets of covers. The standard costs associated with this level of production are:

	Total		Per Set of Covers
Direct materials	$	37,740	$	18.50
Direct labor	$	9,180		4.50
Variable manufacturing overhead (based on direct labor-hours)	$	2,448		1.20
			$	24.20

During August, the factory worked only 1,000 direct labor-hours and produced 2,900 sets of covers. The following actual costs were recorded during the month:

	Total		Per Set of Covers
Direct materials (9,100 yards)	$	52,780	$	18.20
Direct labor	$	13,630		4.70
Variable manufacturing overhead	$	4,640		1.60
			$	24.50

At standard, each set of covers should require 2.5 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.

Answer 1

14560 F 13690 U Answer 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) Variable Overhead Rate Variance (AH*AR)-(AH*SR) Variable Overhead Efficiency Varaince (AH*SR)-(SH*SR) 4630 U 4050 F 2240U 1080 F

7.40 Per Yard 2.5 Yards 7250 Yards 2900 Units 9100 Yards 9100 Yards 5.80 Per Yard AQP Direct Material Standard Price (18.5/2.5) SP Standard quantity Per unit Standard Quantity for Actual Output SQ Actual Output Actual Quantity Purchased Actual Quanity Used AQ Actual Price of Material(52780/9100) AP Direct Labor Standard Rate(9180/1020) SR Standard hours per unit (1020/2040) Standard Hours for Actual output SH Actual Output Actual hours Worked Actual Rate (13630/1000) Varaible OH Standard Rate(3638/1070) SR Standard hours per unit (1020/2040) Standard Hours for Actual output Actual Output Actual hours Worked AH Actula Rate =(4640/1000) AR 9 Per hour 0.5 hours 1450 Hours 2900 Units 1000 hours 13.63 Per hour AH AR SH 2.40 Per hour 0.50 hours 1450 Hours 2900 Units 1000 hours 4.64 Per hour