Marvel Parts Inc manufactures auto accessories One of the co

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 10,750 5.00 2.50 $33.00 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 $31.50 $ 13,000 $ 7,000 At standard, each set of covers should require 3.0 yards of material. All of the materials purchased during the month were used in production

Solution

Material Std quantity allowed for actual output (2500*3): 7500 units Actual quantity: 12500 units Std price per unit (25.5/3): 8.50 Actual price per unit (58750/12500): 4.70 per unit Material price variance: Actual Qty (std price-Actual price) 12500 (8.50-4.70) = 47500 Fav Matrial Quantity variance: Std price (Std quantity-Actual Quantity) 8.50 (7500-12500)= $ 42500 Unfav Labour Std labour hours:(2500*0.50):1250 hrs Actual hourrs: 800 hours Actual rate per hour (13000/800): 16.25 per hour Std rate per hour: 10.00 per hour Labour rate variance: Actual hrs (Std rate-Actua rate) 800 (10.00-16.25) = $ 5000 Unfav Labour efficiency variance: Std rate (Std hours-Actual hours) 10.00 (1250-800) = $ 4500 Fav Variable OH: Std OH rate per huor: $ 5.00 per hour Actual OH rate per hour (7000/800): 8.75 per hour Variable OH rate variance: Actual hours(Std rate-Actual Rate) 800 (5.00-8.75 ) = $ 3000 Unfav Variable OH efficiency variance: Std Oh rate (Std hours-Actual hours) 5.00 ( 1250-800) = $2250 Fav