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 1,055 hours each month to produce 2,110 sets of covers. The standard costs associated with this level of production are:

	Total		Per Set of Covers
Direct materials	$	51,273	$	24.30
Direct labor	$	10,550		5.00
Variable manufacturing overhead (based on direct labor-hours)	$	4,853		2.30
			$	31.60

During August, the factory worked only 1,000 direct labor-hours and produced 2,100 sets of covers. The following actual costs were recorded during the month:

	Total		Per Set of Covers
Direct materials (6,800 yards)	$	49,980	$	23.80
Direct labor	$	10,920		5.20
Variable manufacturing overhead	$	5,460		2.60
			$	31.60

At standard, each set of covers should require 3.0 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.

Answer 1

Std Qty allowed (2100*3)			6300
Std price			8.1
Actual Qty			6800
actual price			7.35
Material price variance = Actual Qty (Std price - Actual price)
		6800 (8.10-7.35) = 5100 Fav
Material Qty variance = Std price (Std qty-Actual Qty)
		8.10 (6300-6800) = 4050 Unfav
Std Hours allowed (2100*0.5)			1050
Std rate per hour			10
Actual hours			1000
Actual Rate per hour			10.92
Labour rate variance = Actual hours (Std rate - Actualrate)
		1000 (10-10.92) = 920 unfav
Labour efficiency variance= Sstd rate (Std hours-Actual hours)
		10 (1050-1000) = 500 fav
Std OH rate:			4.6
Actual Oh rate:			5.46
Variable OH rate variance = Actual DLH (Std rate - Actual rate)
		1000 (4.60-5.46) = 860 unfav
Variable OH efficiency variance = Std rate (Std hours- Actual hrs)
			4.60 (1050-1000) = 230 fav