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 use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,005 hours each month to produce 2.010 sets of covers. The standard costs associated with this level of production are: Total $ 28,542 $ 8,840 Per Set of Covers $14.20 4.ee Direct materials Direct labor Variable manufacturing overhead (based on direct labor-hours) $ 3,618 1.80 $20.00 During August, the factory worked only 1.200 direct labor-hours and produced 2.600 sets of covers. The following actual costs were recorded during the month: Direct materials (6,880 yards) Direct labor Variable manufacturing overhead Total $ 35,180 $ 10,920 $ 5,460 Per Set of Covers $13.50 4.29 2.10 $19.80 At standard, each set of covers should require 2.0 yards of material. All of the materials purchased during the month were used in production.

Answer 1

1) Actual price = $35, 100/6,000 Actual price = $5.85 Standard price = $14.20/2.0 Standard price = $7.1 Standard quantity allowed = 2,600*2.0 Standard quantity allowed =5,200 Materials price variance = (Actual price - Standard price) *Actual quantity Materials price variance = ($5.85 - $7.1)*6,000 Materials price variance = $7,500 Favorable Materials quantity variance = (Actual quantity - Standard quantity)*Standard price Materials quantity variance = (6,000 - 5,200)*$7.1 Materials quantity variance = $5,680 Unfavorable 2) Standard rate = $8,040/1,005 Standard rate = $8 per hour Standard hour per set of cover = 1,005/2,010 Standard hour per set of cover = 0.5 hours

Standard hours allowed = 2,600*0.5 Standard hours allowed = 1,300 hours Actual rate = $10,920/1,200 Actual rate = $9.1 Labor rate variance = (Actual rate - Standard rate) *Actual hours Labor rate variance = ($9.1 - $8)*1,200 Labor rate variance = $1,320 Unfavorable Labor efficiency variance = (Actual hours - Standard hours) *Standard rate Labor efficiency variance = (1,200 -1,300) *$8 Labor efficiency variance = $800 Favorable 3) Actual rate = $5,460/1,200 Actual rate = $4.55 Standard rate = $3,618/1005 Standard rate = $3.6 Variable overhead rate variance = (Actual rate - Standard rate) *Actual hours Variable overhead rate variance = ($4.55 - $3.6)*1,200 Variable overhead rate variance = $1,140 Unfavorable Variable overhead efficiency variance = (Actual hours - Standard hours) *Standard rate Variable overhead efficiency variance = (1,200 - $1,300) *$3.6 Variable overhead efficiency variance = $360 Favorable