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(Solution Download) Marvel Parts, Inc., manufactures auto accessories. One of the companyAc??cs products is a set of


 

 

 

 

 

 

 

Marvel Parts, Inc., manufactures auto accessories. One of the

 

companyAc??cs 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 990 hours

 

each month to produce 1,980 sets of covers. The standard costs

 

associated with this level of production are:

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

Per Set

 

of Covers

 

 

  Direct materials

 

 

$

 

 

45,738  

 

 

$

 

 

23.10

 

 

  Direct labor

 

 

$

 

 

6,930  

 

 

3.50

 

 

  Variable manufacturing overhead

 

      (based on direct labor-hours)

 

 

$

 

 

3,168  

 

 

1.60

 

 

$

 

 

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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

Per Set

 

of Covers

 

 

  Direct materials (10,000 yards)

 

 

$

 

 

56,000  

 

 

$

 

 

22.40

 

 

  Direct labor

 

 

$

 

 

9,250  

 

 

3.70

 

 

  Variable manufacturing overhead

 

 

$

 

 

4,500  

 

 

1.80

 

 

$

 

 

27.90

 

 

  

 

 

 

 

 

 

 

 

At standard, each set of covers should require 3.30 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.

 

(Indicate the effect of each variance by selecting "F" for

 

favorable, "U" for unfavorable, and "None" for no effect (i.e.,

 

zero variance). Round your intermediate calculations to 2 decimal

 

places. Round "Standard Price" and "Actual Price" answers to 2

 

decimal places.)

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

2.

 

 

Compute the labor 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). Round your intermediate calculations to 2 decimal

 

places. Round "Standard Rate" and "Actual Rate" answers to 2

 

decimal places.)

 

 

     

 

 

 

 

 

 

 

 

 

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). Round your intermediate calculations to 2

 

decimal places. Round "Standard Rate" and "Actual Rate" answers to

 

2 decimal places.)

 

 

1.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actual Quantity

 

of Input,

 

at Actual Price

 

 

Actual Quantity

 

of Input,

 

at Standard Price

 

 

Standard Quantity

 

Allowed for Output,

 

at Standard Price

 

 

(AQ Af? AP)

 

 

(AQ Af? SP)

 

 

(SQ Af? SP)

 

 

12,500 yards Af?

 

$8.50 per yard*

 

 

7,500 yards** Af?

 

$8.50 per yards*

 

 

$58,750   

 

 

= $106,250

 

 

= $63,750

 

 

Price Variance,

 

$47,500 F

 

 

Quantity Variance,

 

$42,500 U

 

 


 

 

Spending variance,

 

$5,000 F

 

 


 

 

  

 

 

 

 

 

 

 

 

 

 

 

*$23.80 Af· 3.00 yards = $8.50 per yard

 

 

**2,500 sets Af? 3.00 yards per set = 7,500 yards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alternatively, the variances can be computed using the

 

formulas:

 

 

Materials price variance = AQ (AP ? SP)

 

 

12,500 yards ($4.70 per yard* ? $8.50 per yard) = $47,500 F

 

 

*$58,750 Af· 12,500 yards = $4.70 per yard

 

 

Materials quantity variance = SP (AQ ? SQ)

 

 

$8.50 per yard (12,500 yards ? 7,500 yards) = $42,500 U

 

 

  

 

2.

 

 

 

 

 

 

 

 

Many students will miss parts 2 and 3 because they will try to

 

use product costs as if they were hourlycosts.

 

Pay particular attention to the computation of the standard direct

 

labor time per unit and the standard direct labor rate per

 

hour.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actual Hours

 

of Input,

 

at the Actual Rate

 

 

Actual Hours of

 

Input, at

 

the Standard Rate

 

 

Standard Hours Allowed

 

for Output,

 

at the Standard Rate

 

 

(AH Af? AR)

 

 

(AH Af? SR)

 

 

(SH Af? SR)

 

 

800 hours Af?

 

$10.00 per hour*

 

 

1,250 hours** Af?

 

$10.00 per hour*

 

 

$13,000   

 

 

= $8,000

 

 

= $12,500

 

 

Rate Variance,

 

$5,000 U

 

 

Efficiency Variance,

 

$4,500 F

 

 


 

 

Spending variance,

 

$500 U

 

 


 

 

  

 

  

 

 

 

 

 

 

 

 

 

 

 

*1,075 standard hours Af· 2,150 sets = 0.5 standard hour per set,

 

$5.00 standard cost per set Af· 0.5 standard hours per set = $10

 

standard rate per hour.

 

 

**2,500 sets Af? 0.5 standard hours per set = 1,250 standard

 

hours.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alternatively, the variances can be computed using the

 

formulas:

 

 

Labor rate variance = AH (AR ? SR)

 

 

800 hours ($16.25 per hour* ? $10.00 per hour) = $5,000 U

 

 

*$13,000 Af· 800 hours = $8.75 per hour

 

 

Labor efficiency variance = SR (AH ? SH)

 

 

$10.00 per hour (800 hours ? 1,250 hours) = $4,500 F

 

 


 

3.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actual Hours

 

of Input,

 

at the Actual Rate

 

 

Actual Hours of

 

Input, at

 

the Standard Rate

 

 

Standard Hours Allowed

 

for Output,

 

at the Standard Rate

 

 

(AH Af? AR)

 

 

(AH Af? SR)

 

 

(SH Af? SR)

 

 

800 hours Af?

 

$5.00 per hour*

 

 

1,250 hours Af?

 

$5.00 per hour*

 

 

$7,000   

 

 

= $4,000

 

 

= $6,250

 

 

Rate Variance,

 

$3,000 U

 

 

Efficiency Variance,

 

$2,250 F

 

 


 

 

Spending variance,

 

$750 U

 

 


 

 

 

 

 

 

 

 

 

*$2.50 standard cost per set Af· .50 standard hours per set =

 

$5.00 standard rate per hour

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alternatively, the variances can be computed using the

 

formulas:

 

 

Variable overhead rate variance = AH (AR ? SR)

 

 

800 hours ($8.75 per hour* Ac??o $5.00 per hour) = $3,000 U

 

 

*$7,000 Af· 800 hours = $16.25 per hour

 

 

Variable overhead efficiency variance = SR (AH ? SH)

 

 

$5.00 per hour (800 hours Ac??o 1,250 hours) = $2,250 F

 

 


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