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 1,065 hours each month to produce 2,130 sets of covers. The standard costs associated with this level of production are:

	Total		Per Set of Covers
Direct materials	$	35,358	$	16.60
Direct labor	$	8,520		4.00
Variable manufacturing overhead (based on direct labor-hours)	$	3,195		1.50
			$	22.10

During August, the factory worked only 1,050 direct labor-hours and produced 2,700 sets of covers. The following actual costs were recorded during the month:

	Total		Per Set of Covers
Direct materials (6,000 yards)	$	43,740	$	16.20
Direct labor	$	11,340		4.20
Variable manufacturing overhead	$	5,670		2.10
			$	22.50

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.)

Answer 1

Particulars	Qty/ hours	Rate	amount	Qty/ hours	Rate	amount
Materials	5,400.00	8.30	44,820.00	6,000.00	7.29	43,740.00
Labour	1,350.00	8.0000	10,800.00	1,050.00	10.8000	11,340.00
Overhead	1,350.00	3.00	4,050.00	1,050.00	5.4000	5,670.00
Hours per set of covers = 1065/2130	0.50
Standard material rate per yard = 16.60/2	8.30
Standard labour rate per hour = 4/.50	8.00
Standard V O/H rate per hour = 1.5/.50	3.00
Actual output	2,700.00
Materials reqd = 2700*2	5,400.00
Labour hrs reqd (2700*.50)	1,350.00
DMPV = (SP-AP)*AQ purchased
DMPV = (8.30 - 7.29)6000
DMPV = 6060F
DMQV= (SQ-AQ)SP
DMQV= (5400 - 6000)8.30
DMQV= 4980 U
DLRV= (SR-AR)AH
DLRV= (8 - 10.8)1050
DLRV= 2940 U
DLEV = (SH-AH)SR
DLEV = (1350 - 1050)8
DLEV = 2400 F
VORV = (SR-AR)AH
VORV = (3 - 5.40)1050
VORV = 2,520 U
VOEV = (SH-AH)SR
VOEV = (1350 - 1050)3
VOEV = 900 F