Question
In: Accounting
1. Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of...
1. 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 1,075 hours each month to produce 2,150 sets of covers. The standard costs associated with this level of production are:
| Total | Per Set of Covers |
||||
| Direct materials | $ | 54,825 | $ | 25.50 | |
| Direct labor | $ | 10,750 | 5.00 | ||
| Variable manufacturing overhead (based on direct labor-hours) | $ | 5,375 | 2.50 | ||
| $ | 33.00 | ||||
During August, the factory worked only 800 direct labor-hours and produced 2,500 sets of covers. The following actual costs were recorded during the month:
| Total | Per Set of Covers |
||||
| Direct materials (12,500 yards) | $ | 58,750 | $ | 23.50 | |
| Direct labor | $ | 13,000 | 5.20 | ||
| Variable manufacturing overhead | $ | 7,000 | 2.80 | ||
| $ | 31.50 | ||||
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.
(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.)
2. Sharp Company manufactures a product for which the following standards have been set:
| Standard Quantity or Hours |
Standard Price or Rate |
Standard Cost |
||||||
| Direct materials | 3 | feet | $ | 5 | per foot | $ | 15 | |
| Direct labor | ? | hours | ? | per hour | ? | |||
During March, the company purchased direct materials at a cost of $49,170, all of which were used in the production of 2,750 units of product. In addition, 4,500 direct labor-hours were worked on the product during the month. The cost of this labor time was $36,000. The following variances have been computed for the month:
| Materials quantity variance | $ | 3,450 | U |
| Labor spending variance | $ | 3,000 |
U |
| Labor efficiency variance | $ | 750 |
U |
Required:
1. For direct materials:
a. Compute the actual cost per foot of materials for March.
b. Compute the price variance and the spending variance.
2. For direct labor:
a. Compute the standard direct labor rate per hour.
b. Compute the standard hours allowed for the month’s production.
c. Compute the standard hours allowed per unit of product.
Solutions
Expert Solution
| REQUIRMENT-1 | |||||||
| 1 | Standard | Actual | |||||
| Yard | Rate | Amount | |||||
| Direct Material | 7500 | 8.5 | 63750 | 12500 | 4.7 | 58750 | |
| Standard yard per set of Covers | 3 | ||||||
| Standard Yard require for Actual Units is | 7500 | (3*2500) | |||||
| Standard Rate Per yard | 8.5 | (25.5/3) | |||||
| A | Material Cost Variance = Standard Cost- Actual Cost | ||||||
| 63750-58750 | 5000 | (F) | |||||
| B | Material Price Variance/ Rate Variance =(Standard Rate- Actual Rate)* Actual Quantity | ||||||
| (8.5-4.7)*12500 | 47500 | (F) | |||||
| C | Material Quantity Variance =(Standard quantity - Actual Quantity)* Standard Rate | ||||||
| (7500-12500)*8.5 | 42500 | (A) | |||||
| Cross Verification: | |||||||
| Material Cost Variance = Material Price Variance - Material Quantity Variance | |||||||
| 5000 | = 47500+ -42500 |
| 2 | Labour Variances | ||||||
| Standard | Actual | ||||||
| Hours | Rate | Amount | Hours | Rate | Amount | ||
| Labour | 1250 | 10 | 12500 | 800 | 16.25 | 13000 | |
| Standard Labour Hour per Set | |||||||
| Total Hours | 1075 | ||||||
| Labour Cost | 10750 | ||||||
| Labour Cost Per hour | 10 | 10750/1075 | |||||
| Cost per set | 5 | ||||||
| Hour required per set | 0.5 | 5./10 | |||||
| Standar hours for actual production | 1250 | 2500*.50 | |||||
| A | Labour Cost Variance = Standard Cost- Actual Cost | ||||||
| 12500-13000 | 500 | (A) | |||||
| B | Labour Rate Variance =(Standard Rate- Actual Rate)* Actual Quantity | ||||||
| (10-16.25)*800 | 5000 | (A) | |||||
| C | Labour Efficiency Variance =(Standard Hours - Actual Hours)* Standard Rate | ||||||
| (1250-800)*10 | 4500 | (F) | |||||
| Cross Verification: | |||||||
| Labour Cost Variance = Labour rate Variance - Labour EfficencyVariance | |||||||
| 5000 | = 47500+ -42500 |
| 3 | Variable Overhead Variances | ||||||
| Standard | Actual | ||||||
| Hours | Rate | Amount | Hours | Rate | Amount | ||
| Variable Overhead | 1250 |
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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 1,000 hours
each month to produce 2,000 sets of covers. The standard costs
associated with this level of production are:
Total
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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 1,045 hours
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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 1,035 hours
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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 1,075 hours
each month to produce 2,150 sets of covers. The standard costs
associated with this level of production are:
Total
Per Set...
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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 1,005 hours
each month to produce 2,010 sets of covers. The standard costs
associated with this level of production are:
Total
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