FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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 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 990 hours each month to produce 1,980 sets of covers. The standard costs associated
with this level of production are:
Direct materials
Direct labor
Variable manufacturing overhead (based on direct
labor-hours)
Direct materials (10,000 yards)
Direct labor
Variable manufacturing overhead
Total
Total
$ 56,000
$ 9,250
$ 4,500
$
45,738
$ 6,930
$ 3,168
$ 28.20
During August, the factory worked only 1,000 direct labor-hours and produced 2,500 sets of covers. The following actual costs were
recorded during the month:
Per Set of
Covers
3.70
$ 23.10
1.80
3.50
1.60
Per Set of Covers
$ 22.40
$27.90
At standard, each set of covers should require 3.3 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.
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Transcribed Image Text: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 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 990 hours each month to produce 1,980 sets of covers. The standard costs associated with this level of production are: Direct materials Direct labor Variable manufacturing overhead (based on direct labor-hours) Direct materials (10,000 yards) Direct labor Variable manufacturing overhead Total Total $ 56,000 $ 9,250 $ 4,500 $ 45,738 $ 6,930 $ 3,168 $ 28.20 During August, the factory worked only 1,000 direct labor-hours and produced 2,500 sets of covers. The following actual costs were recorded during the month: Per Set of Covers 3.70 $ 23.10 1.80 3.50 1.60 Per Set of Covers $ 22.40 $27.90 At standard, each set of covers should require 3.3 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.
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