Question

Problem 9-24 Comprehensive Variance Analysis [LO9-4, LO9-5, LO9-6]

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 uses a standard cost system 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

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

Total $ 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

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

Total $ 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.)

Answer 1

Direct Materials Price variance = (Actual Price- Std. price )Actual Quantity

=($3.80-$4)*12000= $2400 F

* Acutal pricce of materal :-45600/12000=$ 3.8 per yard

** Std price of material :- $22.40/ 5.6 yard =$4 per yard

Direct Materials efficiency variance = ( Actual Qty- Std Qty) Std. Price

=(12000-11200)*$4= $3200 UF

* Std Qty of Material= No of Unit Produced * Material required per unit= 2000setX 5.6 yeard= 11200 sq yd.

Direct Labor Price variance = Actual Hour* (Actual Rate * Std rate)

($17.50-$18)* 2800= $1400 F

* Acutal Labour Rate :-$49000/2800 Hour =$17.50 per Hour

* Std rate per Hour :- $51300/2850 Hour= $18 per Hour

Direct Labor Efficiency variance =  ( Actual Hour- Std Hour) * Std. Rate

( 2800Hour- 3000 Hour )* $18= $ 3600 F

* Std Hour require:= 2850 Hour / 1900 Set * 2000 Set= 3000 Hour

Variable Overhead Rate variance = Actual Hour* (Actual Rate - Std rate)

($2.50-$2.40)* 2800= $280 UF

* Acutal Variable Overhead Rate :-$7000/2800 Hour =$2.50 per Hour

* Std Variable OH rate per Hour :- $6840/2850 Hour= $2.40per Hour

Variable OH Efficiency variance =  ( Actual Hour- Std Hour) * Std. Rate

( 2800Hour- 3000 Hour )* $2.40= $480 F

* Std Hour require:= 2850 Hour / 1900 Set * 2000 Set= 3000 Hour