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 2,850 hours each month to produce 1,900 sets of covers. The standard costs associated with this level of production are:

	Total		Per Set of Covers
Direct materials	$	42,560	$	22.40
Direct labor	$	51,300		27.00
Variable manufacturing overhead (based on direct labor-hours)	$	6,840		3.60
			$	53.00

During August, the factory worked only 2,800 direct labor-hours and produced 2,000 sets of covers. The following actual costs were recorded during the month:

	Total		Per Set of Covers
Direct materials (12,000 yards)	$	45,600	$	22.80
Direct labor	$	49,000		24.50
Variable manufacturing overhead	$	7,000		3.50
			$	50.80

At standard, each set of covers should require 5.6 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.)

1	Materials price variance
	Materials quantity variance
2	Labor rate variance
	Labor efficiency variance
3	Variable overhead rate variance
	Variable overhead efficiency variance

Answer 1

Standard materials price per yard	4		=22.4/5.6
Standard labor hour per unit	1.5		=2850/1900
Standard labor rate per labor hour	18		=27/1.5
Standard variable rate per labor hour	2.4		=3.6/1.5
1
Materials price variance	2400	F	=45600-(12000*4)
Materials quantity variance	3200	U	=4*(12000-2000*5.6)
2
Labor rate variance	1400	F	=49000-(2800*18)
Labor efficiency variance	3600	F	=18*(2800-2000*1.5)
3
Variable overhead rate variance	280	U	=7000-(2800*2.4)
Variable overhead efficiency variance	480	F	=2.4*(2800-2000*1.5)