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 990 hours each month to produce 1,980 sets of covers. The standard costs associated with this level of production are:

	Total		Per Set of Covers
Direct materials	$	39,798	$	20.10
Direct labor	$	5,940		3.00
Variable manufacturing overhead (based on direct labor-hours)	$	3,168		1.60
			$	24.70

During August, the factory worked only 1,000 direct labor-hours and produced 2,200 sets of covers. The following actual costs were recorded during the month:

	Total		Per Set of Covers
Direct materials (7,400 yards)	$	40,700	$	18.50
Direct labor	$	8,140		3.70
Variable manufacturing overhead	$	3,960		1.80
			$	24.00

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.

Answer 1

	Budgeted (1980 Set Covers)	Standard(2200 Set Covers)	Actual(2200 Set Covers)
	Quantity/Hrs	Rate	Amount	Quantity/Hrs	Rate	Amount	Quantity/Hrs	Rate	Amount
Material	5940	6.7	39798	6600	6.7	44220	7400	5.5	40700
Labour	990	6	5940	1100	6	6600	1000	8.14	8140
V. Overhead	990	3.2	3168	1100	3.2	3520	1000	3.96	3960
	Total		48906			54340			52800
Material Price Variance = (Standard Price - Actual Price ) Actual Quantity Purchased
= (6.7 - 5.5 ) 7400
		8880	F
Material Quantity Variance = (Standard quantity - Actual Quantity ) Standard Price
= (6600-7400 )*6.7
			5360	U
Labour Rate Variance = (Standard Rate - Actual Rate) Actual Hrs Worked
= (6-8.14)* 1000
		2140	U
Labour Efficiency Variance = (Standard Hrs. - Actual Hrs) Standard Rate
= (1100-1000 ) *6
		600	F
Variable Overhead(OH) Rate Variance = (Standard Rate - Actual Rate ) Actual Machine Hrs Worked
=(3.2-3.96) * 1000
			760	U
Variable OH Efficiency Variance = (Standard hrs. - Actual Hrs) Standard Rate
= (1100-1000)*3.2
			320	F