Question

Marvel Parts, Inc., manufactures auto accessories. One of the company's products is a set of seat covers that can be nearly any small car. The company uses a standard cost system for all of its products. According to the standards tha for the seat covers, the factory should work 990 hours each month to produce 1,980 sets of covers. The standard co with this level of production are: Total $ 45,738 $ 6,930 Per Set of Covers $23.10 3.50 Kipped Direct materials Direct labor Variable manufacturing overhead (based on direct labor-hours) $ 3,168 1.60 $28.20 Book Print ferences During August, the factory worked only 1,000 direct labor-hours and produced 2,500 sets of covers. The following act recorded during the month: Direct materiale (10,000 yarda) Direct labor Variable manufacturing overhead Total $ 56,000 $ 9,250 $ 4,500 Per Set of Covero $22.40 3.70 1.80 $27.90 At standard, each set of covers should require 3.3 yards of material. All of the materials purchased during the month we 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.

Answer 1

Solution 1:

Direct Material Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AQ *	AP =				AQ *	SP =				SQ *	SP =
10000	$5.60	$56,000.00			10000	$7.00	$70,000.00			8250	$7.00	$57,750.00
			$14,000.00	F				$12,250.00	U
			Direct Material Price Variance					Direct Material Qty variance

Solution 2:

Direct Labor Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
1000	$9.25	$9,250.00			1000	$7.00	$7,000.00			1250	$7.00	$8,750.00
			$2,250.00	U				$1,750.00	F
			Direct Labor rate Variance					Direct Labor Efficiency Variance

Solution 3:

Variable Overhead Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
1000	$4.50	$4,500.00			1000	$3.20	$3,200.00			1250	$3.20	$4,000.00
			$1,300.00	U				$800.00	F
			Variable overhead rate variance					Variable overhead efficiency variance