Question

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, di labor and factory overhead incurred for the manufacture of 5.200 units of product were as follows: Actual Costs Direct materials Direct labor Factory overhead 6,700 lb. at $5.80 1,330 hrs. at $18.90 Standard Costs 6,800 lb. at $5.90 1,300 hrs. at $18.70 Rates per direct labor hr., based on 100% of normal capacity of 1,360 direct labor hrs.: $4,760 variable cost $7,888 fixed cost Variable cost, $3.70 Fixed cost, $5.80 Each unit requires 0.25 hour of direct labor Required: a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number Direct materials price variance Direct materials quantity variance Total direct materials cost variance b. Determine the direct labor rate variance, direct labor time variance, and total d irect labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number Direct labor rate variance Direct labor time variance Total direct labor cost variance alable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minussion and an unfavorable variance as a positive number. Variable factory overhead controllable variance Fixed factory overhead volume variance Total factory overhead cost variance

Answer 1

Answer:

Part A

Materials price variance = AQ *(AP-SP) =6700*(5.80-5.90) = -370 =370 favorable

Materials quantity variance = SP * (AQ-SQ) = 5.90*(6700-6800) = - 590 =590 Favorable

Total materials cost variance = 370 favorable + 590 favorable = 960 Favorable

Part B

Labor rate variance = AH* (AR - SR) =1330*(18.90-18.70)= 266 Unfavorable

Labor efficiency variance = SR *(AH - SH) =18.70*(1330-1300) =561 Unfavorable

Total direct labor cost variance = 266 Unfavorable + 561 Unfavorable = 827 Unfavorable

Part C

Variable factory overhead controllable variance = actual variable factory overhead cost incurred - Budgeted variable factory overhead for 1300 hrs = 4760-(1300*3.70) =-50 =50 favorable

Fixed factory overhead volume variance = standard fixed factory overhead cost incurred *(hours at normal capacity - Standard hours for amount produced) = 5.80*(1330-1300)= 174 Unfavorable

Total factory overhead cost variance = 50 favorable + 174 Unfavorable = 124 Unfavorable