Marvel 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 990 hours each month to produce 1,980 sets of covers. The standard costs associated with this level of production are as follows:
15 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 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 as follows: 8 01:34:02 Direct materials Direct labour Variable manufacturing overhead (based on direct labour-hours) Total $ 45,738 $ 6,930 Per Set of Covers $ 23.10 3.50 $ 3,168 1.60 $ 28.29 During August, the factory worked only 1.000 direct labour-hours and produced 2.500 sets of covers. The following actual costs were recorded during the month: Direct materials (10,000 yards) Direct labour Variable manufacturing overhead Total $ 56,000 $ 9,250 $ 4,500 Per Set of Covers $22.40 3.70 1.88 $ 27.99 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. (Input all amounts es positive values. Indicate the effect of each verlance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (I.e, zero verlance).) 15 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. (Input all amounts os positive values. Indicate the effect of each varlance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (le, zero varlance).) 01:33:27 Materials price variance Materials quantity variance 2. Compute the labour rate and efficiency variances for August. (Input all amounts as positive values. Indicate the effect of each verlance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (I.e, zero variance).) Labour rate variance Labour efficiency variance 3. Compute the variable overhead rate and efficiency variances for August. (Input all amounts as positive values. Indicate the effect of each varlance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (I.e, zero varlance).) Variable overhead rate variance Variable overhead efficiency variance 4. This part 4 is to be answered in the next question. Assume the plant manager is responsible for pricing, setting wage rates and control of overhead costs while the production supervisor is responsible for production efficiency. Should either of them be paid a bonus for their results? Explain why. (Note that your explanation is worth 3 marks while parts 1.2 and 3 are worth 12 marks in total.)
