Question

r 10 Probelm 10 - 9 - Saved to this PC- O Search Layout References Mailings Review View Help A ALI Аавьсера | Аавьсера Аавьсс Аавьссс Аав 1 Normal 1 No Spac... Heading 1 Heading 2 Title Styles Paragraph 15 Problem 10 - 9: Comprehensive Variance Analysis 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 2,850 hours each month to produce 1,900 sets of covers. The standard costs associated with this level of production are: Total Per Set of Covers Direct Materials S42.560 $22.40 Direct Labor $17,100 9.00 Variable Manufacturing overhead (based on direct labor-hours) 56,840 3.60 $35.00 During August, the factory worked only 2,800 direct labor-hours and produced 2,000 sets of covers. The following actual costs were recorded during the month: Total Per Set of Covers

Answer 1

1) Standard price= $22.40/5.60= $4 per yard

Actual price= $45600/12000= $3.80 per yard

Materials price variance= (Standard price-Actual price)*Actual quantity

= ($4.00-3.80)*12000

= $2400 F

Materials quantity variance= (Standard quantity-Actual quantity)*Standard rate

= (2000*5.6-12000)*$4.00

= $3200 U

2) Hours required to produce a set of cover= $2850/1900= 1.50 hours

Standard rate= $9.00/1.50= $6.00

Actual rate= $18200/2800= $6.5

Labor rate variance= (Standard rate-Actual rate)*Actual hours

= ($6.00-6.50)*2800

= $1400 U

Labor efficiency variance= (Standard hours-Actual hours)*Standard rate

= (2000*1.5-2800)*$6.00

= $1200 F

3) Hours required to produce a set of cover= $2850/1900= 1.50 hours

Standard rate= $3.60/1.50= $2.40

Actual rate= $7000/2800= $2.50

Variable overhead rate variance= (Standard rate-Actual rate)*Actual hours

= ($2.40-2.50)*2800

= $280 U

Variable overhead efficiency variance= (Standard hours-Actual hours)*Standard rate

= (2000*1.5-2800)*$2.40

= $480 F

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