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 1,040 hours each month to produce 2,080 sets of covers. The standard costs associated with this level of production are: Total $40,560 $ 7,280 Per Set of Covers $19.50 3.50 Direct materials Direct labor Variable manufacturing overhead (based on direct labor-hours) $ 4,1602.00 $25.00 During August, the factory worked only 600 direct labor-hours and produced 1,800 sets of covers. The following actual costs were recorded during the month: Direct materials (5,000 yards) Direct labor Variable manufacturing overhead Total $34,200 $ 6,660 $ 4,140 Per Set of Covers $19.00 3.70 2.30 $25.00 At standard, each set of covers should require 2.50 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. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (ie, zero variance).) F Materials price variance Materials quantity variance 2. Compute the labor rate and efficiency variances for August. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).) Labor rate variance Labor efficiency variance

Answer 1

1. DIRECT MATERIAL quantity RATE per unit 4500 7.80 |(1800*2.5) (19.5/2.5) TOTAL 35,100.00 STANDARD ACTUAL 5000 34,200.00 6.84 (34200/5000) AQ ACTUAL QTY SP STANDARD PRICE AP ACTUAL PRICE SQ STANDARD QTY SR STANDARD RATE AR ACTUAL RATE SH STANDARD HOURS AH ACTUAL HOURS material price variance material QUANTITY variance (SP-AP) *AQ (SQ-AQ)X SP |(7.8-6.84) *5000 (4500-5000)*7.8 4,800 F | 3,900 U| 2. DIRECT LA BOUR hours rate 900 7.00 (1040*1800/2080) (7280/1040) STANDARD total 6,300.00 ACTUAL 600 6,660.00 11.10 ('6660/600) LABOUR RATE VARIANCE (SR-AR)XAH LABOUR EFFICIANCY VARIANCE (SH - AH) XSR (7-11.1)*600 900-600) *7 2,460 U 2,100 F