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 uses a standard cost system 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 production are Per Set Total of Covers Direct materials Direct labor Variable manufacturing overhead $42,560 $22.40 $51,300 2700 based on direct labor-hours)$6,840 3.60 $53.00 During August, the factory worked only 2,800 direct labor-hours and produced 2,000 sets of covers. The following actual costs were recorded during the month Per Set Total of Covers Direct materials (12,000 yards) $45,600 $22.80 $49,000 24.50 Variable manufacturing overhead $7,000 3.50 $50.80 Direct labor At standard, each set of covers should require 5.6 yards of material. All of the materials purchased during the month were used in production Required: Compute the following variances for August 1. The materials price and quantity variances 2. The labor rate and efficiency variances 3 The variable overhead rate and efficiency variances

Answer 1

To compute the variances, compare actual costs with standard costs and determine the differences in each category: materials, labor, and variable overhead.

Step-by-step explanation:

To compute the variances, we need to compare the actual costs with the standard costs and determine the differences. Let's start with the materials variances:

• Materials price variance = (Actual price - Standard price) * Actual quantity
• Materials quantity variance = (Actual quantity - Standard quantity) * Standard price

Next, let's calculate the labor variances:

• Labor rate variance = (Actual rate - Standard rate) * Actual hours
• Labor efficiency variance = (Actual hours - Standard hours) * Standard rate

Finally, we'll find the variable overhead variances:

• Variable overhead rate variance = (Actual rate - Standard rate) * Actual hours
• Variable overhead efficiency variance = (Actual hours - Standard hours) * Standard rate