Question

Problem 10-9 Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3]

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.

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

For Output of	1980	990	Hours Needed
Hour per Seat Cover	0.50	(990/1980)				Material Price Variance
						(Standard Price-Actual Price)Actual Qty
Production Costs:	Standard Qty	Standard Price	Total	PU Cost		(6.70-5.50)*7400
Direct Material	3.00	6.70	20.10	(20.10/3)		8880	Favourable
Direct Labor	0.50	6.00	3.00	(3/0.5)
Variable FOH	0.50	3.20	1.60	(1.6/0.5)		Material Quantity Variance
		Total	24.70			(Standard Qty-Actual Qty)Standard Price
Actual Units	2200					(6600-7400)6.70
Standard Cost for Actual Units:						-5360	Unfavourable
Production Costs:	Standard Qty	Standard Price	Total
Direct Material	6,600	6.70	44,220			Labor Price Variance
Direct Labor	1,100	6.00	6,600			(Standard Price-Actual Price)Actual Hours
Variable FOH	1,100	3.20	3,520			(6.00-8.14)*1000
		Total	54,340			-2140	Unfavourable
Actual Data:						Labor Efficiency Variance
Production Costs:	Actual Qty	Actual Price	Total	PU Cost		(Standard Hour-Actual Hour)Standard Price
Direct Material	7,400	5.50	40,700	(40700/7400)		(1100-1000)6.00
Direct Labor	1,000	8.14	8,140	8140/1000		600	Favourable
Variable FOH	1,000	3.96	3,960	3960/1000
		Total	52,800			Variable OH Price Variance
						(Standard Price-Actual Price)Actual Hours
						(3.20-3.96)*1000
						-760	Unfavourable
						Variable OH Efficiency Variance
						(Standard Hour-Actual Hour)Standard Price
						(1100-1000)3.20
						320	Favourable