Question

Question 1 ch11

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 1,230 hours each month to produce 2,050 sets of covers. The standard costs associated with this level of production are:

  

	Total		Per Set of Covers
Direct materials	$	27,675	$	13.50
Direct labor	$	8,610		4.20
Variable manufacturing overhead (based on direct labor-hours)	$	4,920		2.40
			$	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:

	Total		Per Set of Covers
Direct materials (3,900 yards)	$	19,500	$	13.00
Direct labor	$	6,600		4.40
Variable manufacturing overhead	$	4,800		3.20
			$	20.60

At standard, each set of covers should require 1.80 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. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

2. Compute the labor rate and efficiency variances for August. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

3. Compute the variable overhead rate and efficiency variances for August. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

Answer 1

Answer in your Format
Material
Material price variance	9,750	Favorable
Material quantity variance	9,000	Unfavorable
Labor
Labor Rate variance	1,350	Unfavorable
Labor Efficiency variance	1,050	Favorable
Variable overhead
Variable overhead rate variance	1,800	Unfavorable
Variable overhead efficiency variance	600	Favorable

	Minus sign indicate unfavorable variance.
	Measure	Pound
13.50/1.8	Standard price per Pound	7.50
19500/3900	Actual price per Pound	5.00
1500*1.8	Standard quantity in Pounds	2,700
	Actual quantity in Pounds	3,900
	Standard price per Pound	7.50
Less	Actual price per Pound	-5.00
	Difference	2.50
Multiply	Actual quantity in Pounds	3900
	Material price variance	$     9,750
	Indicate	Favorable
	Standard quantity in Pounds	2700
Less	Actual quantity in Pounds	-3900
	Difference	-1200
Multiply	Standard price per Pound	7.50
	Material quantity variance	$   (9,000)
	Indicate	Unfavorable

	Minus sign indicate unfavorable variance.
	Measure	Hour
8610/1230	Standard price per Hour	7
6600/750	Actual price per Hour	8.8
(1230/2050)*1500	Standard labor Hours	900
	Actual labor Hours	750
	Standard price per Hour	7.00
Less	Actual price per Hour	-8.80
	Difference	-1.80
Multiply	Actual labor Hours	750
	Labor Rate variance	$ (1,350)
	Indicate	Unfavorable
	Standard labor Hours	900
Less	Actual labor Hours	-750
	Difference	150
Multiply	Standard price per Hour	7.00
	Labor Efficiency variance	$    1,050
	Indicate	Favorable

	Minus sign indicate unfavorable variance.
	Measure	Hour
4920/1230	Standard variable overhead rate per Hour	4
4800/750	Actual variable overhead rate per Hour	6.4
(1230/2050)*1500	Standard Hours	900
	Actual Hours	750
	Standard variable overhead rate per Hour	4.00
Less	Actual variable overhead rate per Hour	-6.40
	Difference	-2.40
Multiply	Actual Hours	750
	Variable overhead rate variance	$ (1,800)
	Indicate	Unfavorable
	Standard Hours	900
Less	Actual Hours	-750
	Difference	150
Multiply	Standard variable overhead rate per Hour	4.00
	Variable overhead efficiency variance	$        600
	Indicate	Favorable