Question

He Saved ework Marvel Parts, Inc. manufactures auto accessories. One of the company's products is a set of seat covers that can be adjusted to fit 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 1,230 hours each month to produce 2,050 sets of covers. The standard costs associated with this level of production are: Per Set Direct naterials Direct labor Variable manufacturing overhead (based Total of Covers 27,675 $13.50 8,6104.20 s 4,920 2.40 on direct labor-hours) $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: Per Set Total of pirect paterials (3,900 yards) Direct labor Variable 19,500 $13.00 S 6,6004.40 4,800 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 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. the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Answer 1

Answer

• All working forms part of the answer
• Workings

Actual DATA for		1500	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	3900 yards	$              5.00 [19500/3900]	$           19,500.00
Direct labor	750	$                8.80 [6600/750]	$             6,600.00
Variable Overhead	750	$                6.40 [4800/750]	$             4,800.00

Standard DATA for		1500	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 1.8 yards x 1500 units)=2700 yards	$                   7.50	$       20,250.00
Direct labor	( 0.6 hours x 1500 units)=900 hours	$                   7.00	$         6,300.00
Variable Overhead	( 0.6 hours x 1500 units)=900 hours	$                   4.00	$         3,600.00

• Requirement 1, 2 and 3

Material Price Variance	$                                                     9,750.00	Favourable-F
Material Quantity Variance	$                                                     9,000.00	Unfavourable-U
Labor Rate Variance	$                                                     1,350.00	Unfavourable-U
Labour Efficiency Variance	$                                                     1,050.00	Favourable-F
Variable Overhead Rate Variance	$                                                     1,800.00	Unfavourable-U
Variable Overhead Efficiency Variance	$                                                        600.00	Favourable-F

• Workings for answer

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                        7.50	-	$                       5.00	)	x	3900
	9750
	Variance		$              9,750.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	2700	-	3900	)	x	$                           7.50
	-9000
	Variance		$              9,000.00			Unfavourable-U

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                        7.00	-	$                       8.80	)	x	750
	-1350
	Variance		$              1,350.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	900	-	750	)	x	$                           7.00
	1050
	Variance		$              1,050.00			Favourable-F

Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                        4.00	-	$                       6.40	)	x	750
	-1800
	Variance		$              1,800.00			Unfavourable-U
Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	900	-	750	)	x	$                           4.00
	600
	Variance		$                  600.00			Favourable-F