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 1,030 hours each month to produce 2,060 sets of covers. The standard costs associated with this level of production are:

	Total		Per Set of Covers
Direct materials	$	39,140	$	19.00
Direct labor	$	9,270		4.50
Variable manufacturing overhead (based on direct labor-hours)	$	3,502		1.70
			$	25.20

During August, the factory worked only 640 direct labor-hours and produced 1,600 sets of covers. The following actual costs were recorded during the month:

	Total		Per Set of Covers
Direct materials (5,500 yards)	$	29,920	$	18.70
Direct labor	$	7,520		4.70
Variable manufacturing overhead	$	4,000		2.50
			$	25.90

At standard, each set of covers should require 2.5 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

Standard Cost Sheet PU
Component	Qty	Rate	Price
Direct Material	2.5	7.60	19.00
Direct Labor	0.5	9.00	4.50			Seat Cover	2060
Variable OH	0.5	3.40	1.70			Hours	1030
			25.20			Hour PU	0.50
Actual Cost
Component	Qty	Rate	Price
Direct Material	5500	5.44	29920
Direct Labor	640	11.75	7520
Variable OH	640	6.25	4000
Total			41440
Standard Cost (1600)
Component	Qty	Rate	Price
Material	4000	7.60	30400
Labor	800	9.00	7200
VOH	800	3.40	2720
Total			40320
A	Material Price Variance:	F/A
	(SP-AP)Actual Qty Consumed
	11880	F
A1	Material Usage Variance:
	(SQ-AQ)SP
	-11400	A
B	Labor Price Variance:
	(SP-AP)Actual Hours
	-1760	A
B1	Labor Eff Variance:
	(SH-AH)SP
	1440	F
C	VOH Price Variance:
	(SP-AP)Actual Hours
	-1824	A
C1	VOH Eff Variance:
	(SH-AH)SP
	544	F