Question

Marvel Parts, Inc., manufactures auto accessories. One of the company's products is a set of seat coversat can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According tot 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. ine standard costs associated with this level of production are: Direct materials Direct labor Variable manufacturing overhead (based on direct labor-hours) Total $ 27,675 $ 8,610 Per Set of Covers $13.50 4.20 $ 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: Direct materials (3,900 yards) Direct labor Variable manufacturing overhead Total $ 19,500 $ 6,600 $ 4.800 Per Set of Covers $13.00 4.40 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

Answer 1

calculation of direct material price variance:

= (Standard price per unit of material - Actual price per unit of material) × Actual quantity

= ($7.5/Yards - $5/ yards ) × 3900 Yds = $9750 F

Calculation of direct material quantity variance

=(standard quantity of material required for actual production - actual quantity used) × Standard price per unit

((1500 X1.8)-3900 )X $7.5 = $9000 UF

* Actual Qty used = 79000-38750=40250 Micron

* Actual Price per Yards= 19500/3900=$5 per Yards

* Std Price per Yards =27675/(2050*1.8)=$7.5 per Yards

Calculation of direct labor rate variance

= (Standard direct labor rate per hour - actual direct labor rate per hour) × Actual hours used

= ($7/hour - $8.80/hour) × 750 Hours= $1350 UF

* Actual Hourly Rate:=$6600/750=$8.80 / Hour

** Std Hourly Rate= 8610/1230=$7/Hour

Calculation of direct labor efficiency variance:

= (standard hours required for actual production - actual hours used) × standard overhead recovery rate

= (900 - 750) × $7 = $1050 F

*Std Hour Required = 1230/2050X1500=900 Hour

Calculation of Variable OH rate variance

= (Standard rate per hour - actual rate per hour) × Actual Machine hours used

= ($4/hour - $6.40/hour) × 750 Hours= $1800 U F

* Actual OverHead Rate= $4800/750=$6.40/ Hour

** Std Hourly Rate= 4920/1230=$4/Hour

Calculation of Vaaariable OH efficiency variance:

= (standard hours required for actual production - actual hours used) × standard overhead recovery rate

= (900Hour × 750 Hour) × $4 = $600 F