Problem 10-9 Comprehensive Variance Analysis [L010-1, LO10-2, LO10-3] Marvel Par
ID: 2598408 • Letter: P
Question
Problem 10-9 Comprehensive Variance Analysis [L010-1, 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 1,075 hours each month to produce 2,150 sets of covers. The standard costs associated with this level of production are Per Set Total of Covers Direct materials Direct labor Variable manufacturing overhead (based $ 54,825 $25.50 5.00 2.50 $33.00 10,750 on direct labor-hours) $ 5,375 During August, the factory worked only 800 direct labor-hours and produced 2,500 sets of covers. The following actual costs were recorded during the month Per Set Total of Covers Direct materials (12,500 yards) Direct labor Variable manufacturing overhead $ 58,750 $23.50 5.20 2.80 $ 13,000 $ 7,000 $31.50Explanation / Answer
1. Material price variance = (Standard price-actual price)actual quantity
= (8.5*12500-58750)
Material price variance = 47500 F
Material usage variance = (Standard quantity-actual quantity)standard price
= (2500*3-12500)8.5
Material usage variance = 42500 U
2. Labour price variance = (Standard rate-actual rate)actual Hours
= (10*800-13000)
Labour price variance = 5000 U
Labour usage variance = (Standard hours-actual hours)standard rate
= (2500*.5-800)10
Labour usage variance = 4500 F
3. Variable overhead price variance = (Standard rate-actual rate)actual Hours
= (5*800-7000)
Variable overhead price variance = 3000 U
Variable overhead usage variance = (Standard hours-actual hours)standard rate
= (2500*.5-800)5
Variable overhead usage variance = 2250 F
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