Question

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Mackinaw Inc. processes a base chemical into glastic Standard costs and actual costs for direct materials, direct labor, and factery everhead incurred for the marufature of 7,600 units of produt were an foows Standard Conts Actual Costs Direct maberiat 9.900 b at $570 9,00 at $5.60 Direct laber 1,900 hrs at $670 1,940 hrs at 16.90 Factory overhead Rates per direct labor he based on 100% of narmal capacity of 1,9so direct laber hrs. variable cost, 430 090 variatle cost Flxed cost, $6.80 $13,464 ed cost Each unit requires 0.25 hour of direct labor Required: a Determine the direct materials price variance, direct materials quantity variance, and tital diret matarals cost vartance. Enter a favorable variance as a negative nunder vaing a mins sign and an unfavorable variance as a pestive nunber Direct materials price varance sa0 Unlavorable Direct materials quantity variance 570 Favorable Total direct materials cost varlance 1,550 Undavorable b. Dtemine the direct labor rate variance, direct laber time variance, and total direct labor cost variance. Enter a faverable variance as a negaive number using a minus sign and an untavorable variance as a positive number Direct labor rate variance Unfavorable Direct labor Sime variance Favorable Total direct labor cost variance Favorable c Determine variable factory overhead controllable variance, the fed factory overhead volume varlance, and total factory overhead cost variance Enter a favorabie variance as a negative mber uing a minus ign and an uefaorable variance as a postive number Variable factory overhead controllable variance Favorable Fixed factory overhead volume variance Unfavorable Unfavorable Total factory overhead cost variance

Answer 1

As per HOMEWORKLIB POLICY and guideline, 1^st – four subparts are answered below:

a.

DM price variance = (Standard price – Actual price) × Actual quantity

                               = (5.70 – 5.60) × 9,800

                               = 0.10 × 9,800

                               = 980 Favorable

Since actual price is smaller than standard price, the price variance is favorable.

DM quantity variance = (Standard quantity – Actual quantity) × Standard price

                                    = (9,900 – 9,800) × 5.70

                                    = 100 × 5.70

                                    = 570 Favorable

Since actual quantity is smaller than standard quantity, the quantity variance is favorable.

Total DM cost variance = DM price variance + DM quantity variance

                                       = 980 + 570

                                       = 1,550 Favorable

Since price and quantity both variances are favorable, Total DM cost variance is also favorable.

b.

DL rate variance = (Standard rate – Actual rate) × Actual time

                            = (16.70 – 16.90) × 1,940

                            = 388 Unfavorable

Since actual rate is higher than standard rate, the rate variance is unfavorable

DL time variance = (Standard time – Actual time) × Standard rate

                             = (1,900 – 1,940) × 16.70

                             = 40 × 16.70

                             = 668 Unfavorable

Since actual time is higher than standard time, the time variance is unfavorable.

Total DL cost variance = DL rate variance + DL time variance

                                       = 388 + 668

                                       = 1,056 Unfavorable

Since rate and time both variances are unfavorable, Total DL cost variance is also unfavorable.