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 1,075 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.)

Answer 1

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Standard Material Price		$                 25.50
Standard Quantity		2,500
Actual Quantity		2,500
Actual Quantity used		2,500
Actual Matrial Price		$                 23.50
Material Price Variance	AQ(AP-SP)
	(Actual Price	-	Standard Price)	*	Actual Quantity
	$                                    23.50	-	$                    25.50	*	2500
	$                                    5,000	Favorable
Material Quantity Variance	SP(AQ-SQ)
	(Actual Quantity	-	Standard Qty)	*	Standard Price
	2500	-	2500	*	$                     25.50
	$                                           -	None
Standard Hour Rate		$                 10.00
Standard Hour	2,500*0.5 Hour	1,250
Actual Hours		800
Actual Hour Rate	$13,000/800 Hours	$                 16.25
Labor Rate Variance	AH(AR-SR)
	(Actual Rate	-	Standard Rate)	*	Actual Hours
	$                                    16.25	-	$                    10.00	*	800
	$                                    5,000	Unfavorable
Labor Efficiency Variance	SR(AH-SH)
	(Actual Quantity	-	Standard Qty)	*	Standard Price
	800	-	1250	*	$                     10.00
	$                                    4,500	Favorable
Standard Hour Rate	$7,000/1,075 Hours	$                   6.51
Standard Hour	2,500*0.5 Hour	1,250
Actual Hours		800
Actual Hour Rate	$7,000/800 Hours	$                   8.75
Variable Overehad Rate Variance	AH(AR-SR)
	(Actual Rate	-	Standard Rate)	*	Actual Hours
	$                                      8.75	-	$                       6.51	*	800
	$                                    1,791	Unfavorable
Variable Overhead Efficiency Variance	SR(AH-SH)
	(Actual Quantity	-	Standard Qty)	*	Standard Price
	800	-	1250	*	$                       6.51
	$                                    2,930	Favorable