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 1,010 hours each month to produce 2,020 sets of covers. The standard costs associated with this level of production are:

During August, the factory worked only 1,080 direct labor-hours and produced 2,700 sets of covers. The following actual costs were recorded during the month:

At standard, each set of covers should require 2.0 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.)

Total Per Set
of Covers Direct materials $ 36,360 $ 18.00 Direct labor $ 7,070 3.50 Variable manufacturing overhead (based on direct labor-hours) $ 3,030 1.50 $ 23.00 1. Materials price variance Materials quantity variance 2. Labor rate variance Labor efficiency variance 3. Variable overhead rate variance Variable overhead efficiency variance

Explanation / Answer

Standard @ 2,700 seat covers Actual @ 2,700 seat covers Quantity Unit Rate Amount Quantity Unit Rate Amount Direct Material 5400 Yards        9.00 48,600.00 8100 Yards        5.80 46,980.00 Direct Labor 1350 Hours        7.00    9,450.00 1080 Hours        9.25    9,990.00 Variable Manufacturing Overhead 1350 Hours        3.00    4,050.00 1080 Hours        4.25    4,590.00 1 Materials Price Variance (Standard Rate - Actual Rate)*Actual Quantity Standard Rate        9.00 Actual Rate        5.80 Actual Quantity      8,100    25,920 F Materials Quantity Variance (Standard Quantity - Actual Quantity)*Standard Rate Standard Quantity 5400 Actual Quantity 8100 Standard Rate 9 Actual Quantity -24,300 U 2 Labor Rate Variance (Standard Rate - Actual Rate)*Actual Quantity Standard Rate        7.00 Actual Rate        9.25 Actual Quantity      1,080    -2,430 U Labor Efficiency Variance (Standard Quantity - Actual Quantity)*Standard Rate Standard Quantity 1350 Actual Quantity 1080 Standard Rate             7 Actual Quantity      1,890 F 3 Variable Overhead Rate Variance (Standard Rate - Actual Rate)*Actual Quantity Standard Rate        3.00 Actual Rate        4.25 Actual Quantity      1,080    -1,350 U Variable Overhead Efficiency Variance (Standard Quantity - Actual Quantity)*Standard Rate Standard Quantity 1350 Actual Quantity 1080 Standard Rate             3 Actual Quantity         810 F

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