Question
Arvel Parts, Inc., manufactures auto accessories. One of the companys products is a set of seat covers that can be adjusted to fit nearly any
Arvel Parts, Inc., manufactures auto accessories. One of the companys 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 1,035 hours each month to produce 2,070 sets of covers. The standard costs associated with this level of production are:
| Total | Per Set of Covers | |||
Direct materials | $ | 31,878 | $ | 15.40 |
|
Direct labor | $ | 6,210 |
| 3.00 |
|
Variable manufacturing overhead (based on direct labor-hours) | $ | 4,347 |
| 2.10 |
|
|
|
| $ | 20.50 |
|
During August, the factory worked only 500 direct labor-hours and produced 1,700 sets of covers. The following actual costs were recorded during the month:
| Total | Per Set of Covers | |||
Direct materials (5,000 yards) | $ | 25,500 | $ | 15.00 |
|
Direct labor | $ | 5,440 |
| 3.20 |
|
Variable manufacturing overhead | $ | 4,080 |
| 2.40 |
|
|
|
| $ | 20.60 |
|
At standard, each set of covers should require 2.0 yards of material. All of the materials purchased during the month were used in production.
Required: ( 2.5 points total)
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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