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

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 995 hours each month to produce 1,990 sets of covers. The standard costs associated with this level of production are Per Set Direct materials Direct labor Variable manufacturing overhead (based Total of Covers $8,955 $2,388 $47,362 $23.80 4.50 1.20 $29.50 on direct labor-hours) During August, the factory worked only 1,000 direct labor-hours and produced 2,300 sets of covers. The following actual costs were recorded during the month Per Set Total of Covers Direct materials (8,800 yards) Direct labor Variable manufacturing overhead 50,600 $22.00 4.60 2.00 $28.60 $10,580 $4,600 At standard, each set of covers should require 3.5 yards of material. All of the materials purchased during the month were used in production

Explanation / Answer

1) Material price variance = (6.8*8800-50600) = 9240 F

Material quantity variance = (2300*3.5-8800)*6.8 = 5100 U

2) Labour price variance = (9*1000-10580) = 1580 U

Labour efficiency variance = (2300*.50-1000)*9 = 1350 F

3) Variable overhead rate variance = (2.4*1000-4600) = 2200 U

Variable overhead efficiency variance = (1150-1000)*2.4 = 360 F

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