Question

22-03A ALGO (Algorithmic) Material, Direct Labor and Factory Overhead Cost Variance Analysis w Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, director and factory overhead incurred for the manufacture of 70,000 units of product were as follows: et materials 187.100 lbs at $5.60 17.900 hrs. $18.90 ctory overhead Standard Costs 169,000 $5.70 17,500 a $18.60 Rates per direct labor her, based on 100% of normal capacity of 18,260 direct laboris Variable cost, 4.70 Fred cost $7.40 581,430 variable $135.124 Medo chut requires 0.25 hour of direct labor Required: . Determine the direct material price variance, direct matema t y and red materes verance Direct Material Price Variance Direct Materials Quantity Variance Total Direct Material Cost Variance gamis s a vorable variance as a p u be areas negative number e b. Determine the direct labore t aborti o n and ret labora nce. Enter a fever Direct Labor Rae Variance Direct Labor Time Variance Total Direct Labor Cost Variance Determine variable factory outlet Variable factory overhead centro Fixed actory red volume vaner Tot cery overtad con variance

Answer 1

Solution a:

Direct Material Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AQ *	AP =				AQ *	SP =				SQ *	SP =
187100	$5.60	$1,047,760.00			187100	$5.70	$1,066,470.00			189000	$5.70	$1,077,300.00
			-$18,710.00	F				-$10,830.00	F
			Direct Material Price Variance					Direct Material Qty variance
Direct material price variance					-$18,710.00	F
Direct material quantity variance					-$10,830.00	F
Direct material cost variance					-$29,540.00	F

solution b:

Direct Labor Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
17900	$18.90	$338,310.00			17900	$18.60	$332,940.00			17500	$18.60	$325,500.00
			$5,370.00	U				$7,440.00	U
			Direct Labor rate Variance					Direct Labor Efficiency Variance
Direct Labor Rate variance					$5,370.00	U
Direct Labor Efficiency variance					$7,440.00	U
Direct labor cost variance					$12,810.00	U

Solution c:

Variable factory overhead controllable variance = Actual cost of variable overhead - Standard cost of variable overhead

= $81,430 - (17500*$4.70) = - $820 F

Fixed factory overhead volume variance = Budgeted fixed overhead - Fixed overhead applied

= $135,124 - (17500 * $7.40) = $5,624 U

Total factory overhead cost variance = - $820 F + $5,624 U = $4,804 U