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PROBLEM 10-28 Comprehensive Variance Analysis

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PROBLEM 10-28 Comprehensive Variance Analysis
Marvel Parts, Inc. manufactures auto accessories. One of the company's products is a set of seat covers that can he 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 2,850 hours each month to produce 1,900 sets of covers. The standard costs associated with this level of production are:

Total Per Set of Covers
Direct materials $42,560 $22.40
Direct labor $17,100 9.00
Variable manufacturing overhead
(based on direct labor hours) $6,840 3.60
$35.00

During August., the factory worked only 2,800 direct labor-hours and produced 2,000 sets of covers. The following actual costs were recorded during the month:

Total Per Set of Covers
Direct materials $45,560 $22.80
Direct labor $18,200 9.10
Variable manufacturing overhead
(based on direct labor hours) $7,000 3.50
$35.40

At standard, each set of covers should require 5.0 meters of material. All of the materials purchased during the month were used in production.

Required:
Compute the following variances for August:
1. The materials price and quantity variances.
2. The labor rate and efficiency variances.
3. The variable overhead spending and efficiency variances,.

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Solution Summary

This solution provides an Excel file with calculations of variances and formula sheet for easy reference and conceptual clarity.

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