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 of Covers $29 20 4.00 Total $59,276 S 8,120 Direct materials Direct labor Variable manufacturing overhead (based on direct labor-hours) S 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 Per Set of Covers $28.00 Total $42.000 S 6300 S 3.150 Direct materials (8.400 yards) Direct labor Variable manufacturing overhead 4.20 2.10 $34 30 At standard, each set of covers should require 4.00 yards of material All of the materials purchased during the month wore used in production Required 1. Compute the materials price and quantity variances for August. (Input all amounts as positive valus. Indicate the offect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None for no effect (e, zero variance).) Materials price variance Materials quantity variance

Answer 1

Answer

• Working

Actual DATA for		1500	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	8400	$                   5.00	$           42,000.00
Direct labor	700	$                   9.00	$             6,300.00
Variable Overhead	700	$                   4.50	$             3,150.00

Standard DATA for		1500	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 4 yards x 1500 units)=6000 yards	$                   7.30	$       43,800.00
Direct labor	( 0.5 hours x 1500 units)=750 hours	$                   8.00	$         6,000.00
Variable Overhead	( 0.5 hours x 1500 units)=750 hours	$                   3.80	$         2,850.00

• Requirement 1

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                                7.30	-	$                       5.00	)	x	8400
	19320
	Variance		$            19,320.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	6000	-	8400	)	x	$                           7.30
	-17520
	Variance		$            17,520.00			Unfavourable-U

• Requirement 2

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                                8.00	-	$                       9.00	)	x	700
	-700
	Variance		$                  700.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	750	-	700	)	x	$                           8.00
	400
	Variance		$                  400.00			Favourable-F

• Requirement 3

Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                                3.80	-	$                       4.50	)	x	700
	-490
	Variance		$                  490.00			Unfavourable-U
Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	750	-	700	)	x	$                           3.80
	190
	Variance		$                  190.00			Favourable-F