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 1,015 hours each month to produce 2,030 sets of covers. The standard costs associated with this level of production are: Per Set Total of Covers $ 59,276 $29.20 $ 8,120 4.00 Direct materials Direct labor Variable manufacturing overhead (based on direct labor-hours) $ 3,857 1.90 $35.10 During August, the factory worked only 700 direct labor-hours and produced 1,500 sets of covers. The following actual costs were recorded during the month: Direct materials (8,400 yards) Direct labor Variable manufacturing overhead Total $ 42,000 $ 6,300 $ 3, 150 Per Set of Covers $28.00 4.20 2.10 $34.30 At standard, each set of covers should require 4.0 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. (Indicate 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

1)

	Standard Price	-	Actual Price	x	Actual Qty	=Variance
Materials Price Variance	$                   7.30		$            5.00		8,400.00	19320	F
	Standard Qty	-	Actual Qty	x	Standard Price	=Variance
Materials Qty Variance	6,000.00		8,400.00		$                   7.30	17520	U

2)

	Standard Rate	-	Actual rate	x	Actual Hours	=Variance
Labor Rate Variance	$                   8.00		$            9.00		700.00	700.00	U
	Standard Hours	-	Actual Hours	x	Standard Rate	=Variance
Labor Efficiency Variance	750.00		700.00		$                   8.00	400.00	F

3)

	Standard Rate	-	Actual rate	x	Actual Hours	=Variance
Variable Overhead Rate Variance	$                   3.80		$            4.50		700.00	490.00	U
	Standard Hours	-	Actual Hours	x	Standard Rate	=Variance
Variable overhead Efficiency Variance	750.00		700.00		$                   3.80	190.00	F