ZZZ The company 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 (i.e., the standard hours per set of covers is 0.5 standard hour per set, calculated as 990 standard hours 1,980 sets). The standard costs associated with this level of production are:

Total Per Set

of Covers

Direct materials $ 51,163 $ 25.84

Direct labor $ 8,910 4.50

Variable manufacturing overhead (based on direct labor-hours) $ 2,970 1.50

$ 31.84

During August, the factory worked only 1,000 direct labor-hours and produced 2,050 sets of covers. The following actual costs were recorded during the month:

Total Per Set of Covers

Direct materials (8,000 yards) $ 48,000 $ 23.41

Direct labor $ 9,360 4.57

Variable manufacturing overhead $ 4,080 1.99

$ 29.97

At standard, each set of covers should require 3.8 yards of material. All of the materials purchased during the month were used in production.

2. Complete the worksheet below. Compute the AR, AH, SR, SH of direct labor, and the labor rate and efficiency variances for August. Indicate the effect of each variance (i.e., labor rate variance and labor efficiency variance): F for favorable, U for unfavorable, and None for no effect (i.e., zero variance). Input all amounts as positive values.

AR (Actual Rate per hour)

AH (Actual Hours of Input, in hours)

SR (Standard Rate per hour)

SH (Standard Hours Allowed for Output, in hours)

Labor rate variance

Labor efficiency variance

3. Complete the worksheet below. Compute the AR, AH, SR, SH of variable manufacturing overhead, and the variable overhead rate and efficiency variances for August. Indicate the effect of each variance (i.e., variable overhead rate variance and variable overhead efficiency variance): F for favorable, U for unfavorable, and None for no effect (i.e., zero variance). Input all amounts as positive values.

AR (Actual Rate per hour)

AH (Actual Hours of Input, in hours)

SR (Standard Rate per hour)

SH (Standard Hours Allowed for Output, in hours)

Variable overhead rate variance

Variable overhead efficiency variance