tpx0.9596258696260781 1523818732096 Marvel Parts, Inc., manufactures auto access
ID: 2521949 • Letter: T
Question
tpx0.9596258696260781 1523818732096 Marvel Parts, Inc., manufactures auto accessories. One of the company's products is a set of seat covers that can be adjusted to fit nearty 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 1,070 hours each month to produce 2,140 sets of covers. The standard costs associated with this level of production are Total of Covers Direct materials Direct labor Variable manufacturing overhead $26,964 $12.60 $ 11,770 5.50 $ 3,6381.70 $19.80 (based on direct labor-hours) During August, the factory worked only 1,000 direct labor-hours and produced 2,400 sets of covers. The following actual costs were recorded during the month Per Set Totalot Covers Direct materials (6,000 yards) Direct labor Variable manufacturing overhead $29.280 $12.20 $13,6805.70 S 5,7602.40 $20.30 At standard, each set of covers should require 1.50 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" tor no effect (I.e, zero variance).) Materiats price variance Materals quanbty vanianceExplanation / Answer
Materials price variance
Standard material price should have been
(26964 x 2400 /2140)
30240
Actual material price
29280
Materials price variance (30240 -29280)
960
F
Material quantity variance
Standard material quantity for 2400 sets of covers (2400 x 1.5)
3360
Actual quantity of material
6000
Material quantity variance (3360 - 6000)
-2640
U
Labour rate variance
Standard labour rate
5.5
Actual labour rate
5.7
Labour rate variance
{(5.5-5.7) x 100/5.5)}
-3.64
U
Labour efficiency variance
Standard number of hours required for production of 2140 sets
(11770 / 5.5)
2140
Thus, standard hours required for production 2400 covers
(2140 x 2400/2140)
2400
Actual hours needed to manufacture 2400 sets
(13680 / 5.7)
2400
Labour efficiency variance (2400-2400): No variance
Variable overhead rate variance
Standard variable overhead rate
1.7
Actual variable overhead rate
2.4
Variance (1.7-2.4)
-0.7
Variable overhead rate variance
(-0.7 x 100/1.7)
-41.1764706
Variable overhead efficiency variance (2400 2400) Note 1:
No variance
Note 1: Since the standard hours and actual hours are equal, 2400 hours hence, no variable overhead efficiency variance.
Materials price variance
Standard material price should have been
(26964 x 2400 /2140)
30240
Actual material price
29280
Materials price variance (30240 -29280)
960
F
Material quantity variance
Standard material quantity for 2400 sets of covers (2400 x 1.5)
3360
Actual quantity of material
6000
Material quantity variance (3360 - 6000)
-2640
U
Labour rate variance
Standard labour rate
5.5
Actual labour rate
5.7
Labour rate variance
{(5.5-5.7) x 100/5.5)}
-3.64
U
Labour efficiency variance
Standard number of hours required for production of 2140 sets
(11770 / 5.5)
2140
Thus, standard hours required for production 2400 covers
(2140 x 2400/2140)
2400
Actual hours needed to manufacture 2400 sets
(13680 / 5.7)
2400
Labour efficiency variance (2400-2400): No variance
Variable overhead rate variance
Standard variable overhead rate
1.7
Actual variable overhead rate
2.4
Variance (1.7-2.4)
-0.7
Variable overhead rate variance
(-0.7 x 100/1.7)
-41.1764706
Variable overhead efficiency variance (2400 2400) Note 1:
No variance
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