Problem 109 Comprehensive Variance Analysis L0101 LO102 LO10

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 1,030 hours each month to produce 2,060 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 39,140 $19.00 9,270 4.50 on direct labor-hours) s 3,502 1.70 $25.20 During August, the factory worked only 640 direct labor-hours and produced 1,600 sets of covers. The following actual costs were recorded during the month: Per Set Total of Covers Direet materiale (5,500 yards) Direct 1labor Variable manufacturing overhead 29,920 $18.70 s 7,520 4.70 4,0002.50 25.90 At standard, each set of covers should require 2.5 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

Solution

Solution: Particulars Standard Actual Matrial in quantity 4000 5500 Material price per unit 19 18.7 Direct Labor 800 640 Direct labor rate 4.5 4.7 Variable rate 1.7 2.5 Variable efficiency 800 640 1) Material Price Variance (Standard Rate-Actual Rate)*Actual Quantity 1650 (F) (19-18.7)*5500 Material quantity variance (Standard Quantity-Actual Quantity)*Standard Rate 28500 (U) (4000-5500)*19 2) Labor Rate Variance (Standard Rate-Actual Rate)*Actual Labor hrs 128 (U) (4.5-4.7)*640 Labor efficiency variance 720 (F) (Standard Labor Hrs-Actual Labor Hrs)*Standard Rate (800-640)*4.5 3) Variable rate Variance 512 (U) (Standard Rate-Actual Rate)*Actual variable hrs (1.7-2.5)*640 Variable overhead efficiency variance 272 (F) (800-640)*1.7