Part 2)

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 995 hours each month to produce 1,990 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) Per Set Total of Covers $ 47,362 $23.80 $ 8,955 4.50 $ 2,388 1.20 $29.50 During August, the factory worked only 1,000 direct labor-hours and produced 2,300 sets of covers. The following actual costs were recorded during the month: Direct materials (8,800 yards) Direct labor Variable manufacturing overhead Total $ 50,600 $ 10,580 $ 4,600 Per Set of Covers $22.00 4.60 2.00 $28.60 At standard, each set of covers should require 3.5 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.) 1. Materials price variance Materials quantity variance 2. Labor rate variance Labor efficiency variance 3. Variable overhead rate variance Variable overhead efficiency variance John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital's lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospital's lab for the past month. The following information is available: a. Two types of tests are performed in the lab-blood tests and smears. During the past month, 550 blood tests and 2,600 smears were performed in the lab. b. Small glass plates are used in both types of tests. During the past month, the hospital purchased 13,000 plates at a cost of $49,400. 1,600 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. c. During the past month, 1,600 hours of labor time were recorded in the lab at a cost of $16,960. d. The lab's variable overhead cost last month totaled $11,520. Valley View Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs: Plates: Three plates are required per lab test. These plates cost $4.00 each and are disposed of after the test is completed. Labor. Each blood test should require 0.4 hours to complete, and each smear should require 0.20 hours to complete. The average cost of this lab time is $11.60 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $6.70 per hour. Required: 1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month. 2. For labor cost in the lab: a. Compute a labor rate variance and a labor efficiency variance. b. In most hospitals, one-half of the workers in the lab are senior technicians and one-half are assistants. In an effort to reduce costs, Valley View Hospital employs only one-fourth senior technicians and three-fourths assistants. Would you recommend that this policy be continued? 3-a. Compute the variable overhead rate and efficiency variances. 3-b. Is there any relation between the variable overhead efficiency variance and the labor efficiency variance? Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Req 3A Req 3B Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month. (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.) Materials price variance Materials quantity variance