Marvel Parts, Incorporated, 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: Total Per Set of Covers Direct materials $ 54,825 $ 25.50 Direct labor $ 10,750 5.00 Variable manufacturing overhead (based on direct labor-hours) $ 5,375 2.50 $ 33.00 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: Total Per Set of Covers Direct materials (12,500 yards) $ 58,750 $ 23.50 Direct labor $ 13,000 5.20 Variable manufacturing overhead $ 7,000 2.80 $ 31.50 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. 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.)
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Problem 10-9 (Algo) Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3]
Marvel Parts, Incorporated, 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
| Total | Per Set of Covers | |
|---|---|---|
| Direct materials | $ 54,825 | $ 25.50 |
| Direct labor | $ 10,750 | 5.00 |
| Variable manufacturing |
$ 5,375 | 2.50 |
| $ 33.00 |
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:
| Total | Per Set of Covers | |
|---|---|---|
| Direct materials (12,500 yards) | $ 58,750 | $ 23.50 |
| Direct labor | $ 13,000 | 5.20 |
| Variable manufacturing overhead | $ 7,000 | 2.80 |
| $ 31.50 |
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.
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.)
![**Problem 10-9 (Algo) Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3]**
Marvel Parts, Incorporated, 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:
| Cost Components | Total | Per Set of Covers |
|--------------------------------------|---------|-------------------|
| Direct materials | $54,825 | $25.50 |
| Direct labor | $10,750 | $5.00 |
| Variable manufacturing overhead | $5,375 | $2.50 |
| **Total** | | **$33.00** |
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:
| Cost Components | Total | Per Set of Covers |
|--------------------------------------|---------|-------------------|
| Direct materials (12,500 yards) | $58,750 | $23.50 |
| Direct labor | $13,000 | $5.20 |
| Variable manufacturing overhead | $7,000 | $2.80 |
| **Total** | | **$31.50** |
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.
**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.)*
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