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 1,020 hours each month to produce 2,040 sets of covers. The standard costs associated with this level of production are:

  

	Total		Per Set of Covers
Direct materials	$	37,740	$	18.50
Direct labor	$	9,180		4.50
Variable manufacturing overhead       (based on direct labor-hours)	$	2,448		1.20
			$	24.20

  

During August, the factory worked only 1,000 direct labor-hours and produced 2,900 sets of covers. The following actual costs were recorded during the month:

	Total		Per Set of Covers
Direct materials (9,100 yards)	$	52,780	$	18.20
Direct labor	$	13,630		4.70
Variable manufacturing overhead	$	4,640		1.60
			$	24.50

  

At standard, each set of covers should require 2.50 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. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

      

2.	Compute the labor rate and efficiency variances for August. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

      

3.	Compute the variable overhead rate and efficiency variances for August. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

     

Answer 1

	Budgted - 2040 units			Standered Cost-2900 units			Actual
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
Material	5100	7.4	37740	7250	7.4	53650	9100	5.8	52780
Labour	1020	9	9180	1450	9	13050	1000	13.63	13630
Variable OH	1020	2.4	2448	1450	2.4	3480	1000	4.64	4640

Material Price Variance	(SR-AR)AQ Purchase		(7.4-5.8)*9100		14560	"F"
Material Qty Variance	(SQ-AQ)SR		(7250-9100)*7.4		-13690	"U"
Labour rate Variance	(SR-AR)A. Hrs		(9-13.63)*1000		-4630	"U"
Labour efficiency Variance	(Shrs- Ahrs)SR		(1450-1000)*9		4050	"F"
V OH Rate Variance	(SR-AR)A. Hrs		(2.4-4.64)*1000		-2240	"U"
V OH Effici Variance	(Shrs- Ahrs)SR		(1450-1000)*2.4		1080	"F"