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Compute the labor rate and efficiency variances for August.

Question

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 1,030 hours each month to produce 2,060 sets of covers. The standard costs associated with this level of production are:

 

TotalPer Set
of Covers
  Direct materials$39,140$19.00
  Direct labor$9,2704.50
  Variable manufacturing overhead
(based on direct labor-hours)
$3,5021.70
$25.20

 

During August, the factory worked only 640 direct labor-hours and produced 1,600 sets of covers. The following actual costs were recorded during the month:
TotalPer Set
of Covers
  Direct materials (5,500 yards)$29,920$18.70
  Direct labor$7,5204.70
  Variable manufacturing overhead$4,0002.50
$25.90

 

At standard, each set of covers should require 2.50 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.

Compute the labor rate and efficiency variances for August.

Compute the variable overhead rate and efficiency variances for August.

Solution:

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