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In: Accounting
Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat...
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 1,005 hours each month to produce 2,010 sets of covers. The standard costs associated with this level of production are:
| Total | Per Set of Covers |
||||
| Direct materials | $ | 28,542 | $ | 14.20 | |
| Direct labor | $ | 8,040 | 4.00 | ||
| Variable manufacturing overhead (based on direct labor-hours) | $ | 3,618 | 1.80 | ||
| $ | 20.00 | ||||
During August, the factory worked only 1,200 direct labor-hours and produced 2,600 sets of covers. The following actual costs were recorded during the month:
| Total | Per Set of Covers |
||||
| Direct materials (6,000 yards) | $ | 35,100 | $ | 13.50 | |
| Direct labor | $ | 10,920 | 4.20 | ||
| Variable manufacturing overhead | $ | 5,460 | 2.10 | ||
| $ | 19.80 | ||||
At standard, each set of covers should require 2.0 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.)
Solutions
Expert Solution
| Std Data | ||||||||||
| Output | 2010 | |||||||||
| Hours | 1005 | 0.5 | ||||||||
| Yard | 4020 | 2.0 | ||||||||
| Per yard cost | 7.1 | |||||||||
| std qty for actual prod. | 5200 | |||||||||
| std hour for actual prod. | 1300 | |||||||||
| Direct Material | 28542 | 14.20 | ||||||||
| Direct Labour | 8040 | 4.00 | 8 | |||||||
| Variable Overhead | 3618 | 1.80 | 3.6 | |||||||
| Total | 40200 | 20 | ||||||||
| Actual Data | ||||||||||
| Output | 2600 | |||||||||
| Hours | 1200 | |||||||||
| Yard | 6000 | 2.31 | ||||||||
| Per yard cost | 5.85 | |||||||||
| Direct Material | 35100 | 13.5 | ||||||||
| Direct Labour | 10920 | 4.2 | 9.1 | |||||||
| Variable Overhead | 5460 | 2.1 | 4.55 | |||||||
| 51480 | 19.8 | |||||||||
| 1 | Material Price variance=(std price-actual price)x Actual quantity | |||||||||
| (7.1-5.85)x6000 = | 7500 | Favourable | ||||||||
| Material Quantity variance=(std quantity for actual production-actual quantity)x std price | ||||||||||
| (5200-6000)x7.1 = | 5680 | unfavourable | ||||||||
| 2 | Labour rate variance=(Actual hours x Actual rate)-(actual hours x std rate) | |||||||||
| (1200x9.1)-(1200*8)= | 1320 | unfavourable | ||||||||
| Labour efficiency variance=(Actual hours -std hours for actual production) x std rate) | ||||||||||
| (1200 - 1300)x9.1 | 910 | Favourable | ||||||||
| 3 | Variable overhead rate variance=(actual variable mfg. overhead-(std variable hours for actual production)xstd rate | |||||||||
| (5460-(1200*3.6) = | 1140 | unfavourable | ||||||||
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fit nearly any small car. The company has a standard cost system in
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