PROBLEM 8-24A Comprehensive Variance Analysis[L08-4, LO8-5, L08-6] Marvel Parts,
ID: 2560327 • Letter: P
Question
PROBLEM 8-24A Comprehensive Variance Analysis[L08-4, LO8-5, L08-6] 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 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 produc- tion follow: Per Set Totalof Covers Direct materials. Direct labor Variable manufacturing overhead $42,560 $22.40 9.00 $17,100 (based on direct labor-hours) 3.60 $35.00 $6,840Explanation / Answer
Direct Material Price Variance = (Standard Rate - Actual Rate) x Actual Quantity = ( 22.40/5.60 - 45600/12000) x 12000 = 2400 Fav Direct Material Quantity Variance = (Standard Quantity - Actual Quantity) x Standard Rate = ( 5.60 x 2000 - 12000) x 4 = 3200 Unfav Direct Labor Rate Variance = (Standard Rate - Actual Rate) x Actual Hours = [17100/2850 - 6.50] x 2800 = 1400 Unfav Actual labor Price Per hour = Total Cost / total hours = 18200 / 2800 = 6.50 per hour Direct Labor Efficiency Variance = (Standard Hours- Actual Hours) x Standard Rate = [2000 x 1.5 - 2800] x 6.00 = 600 Fav Standard Hour Per Unit = Standard Hours / Standard Output = 2850 / 1900 = 1.5 Hour Variable Overhead Spending Variance = (Standard Rate - Actual Rate) x Actual Hours = [2.40 -2.50 ] x 2800 = 280 Unfav Standard Rate Per Hour = Standard Cost / Standard Hours = 6840 / 2850 = 2.4 Hour Actual Overhead Per hour = Total Cost / total hours = 7000 / 2800 = 2.50 per hour Variable Overhead Efficiency Variance = (Standard Hours- Actual Hours) x Standard Rate = [2000 x 1.5 - 2800] x 2.40 = 480 Fav
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