Eastern Polymers, Inc., processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 5,200 units of product were as follows:
Standard Costs | Actual Costs | ||
Direct materials | 6,800 lbs. at $4.8 | 6,700 lbs. at $4.7 | |
Direct labor | 1,300 hrs. at $16.1 | 1,330 hrs. at $16.4 | |
Factory overhead | Rates per direct labor hr., | ||
based on 100% of normal | |||
capacity of 1,360 direct | |||
labor hrs.: | |||
Variable cost, $4.8 | $6,180 variable cost | ||
Fixed cost, $7.6 | $10,336 fixed cost |
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.
Price variance | $ | |
Quantity variance | $ | |
Total direct materials cost variance | $ |
b. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Rate variance | $ | |
Time variance | $ | |
Total direct labor cost variance | $ |
c. Determine variable 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 minus sign and an unfavorable variance as a positive number.
Variable factory overhead controllable variance | $ | |
Fixed factory overhead volume variance | $ | |
Total factory overhead cost variance | $ |
Solution a:
Direct Material Cost Variance | ||||||||||||
Actual Cost | Standard cost for actual quantity | Standard Cost | ||||||||||
AQ * | AP = | AQ * | SP = | SQ * | SP = | |||||||
6700 | $4.70 | $31,490.00 | 6700 | $4.80 | $32,160.00 | 6800 | $4.80 | $32,640.00 | ||||
$670.00 | F | $480.00 | F | |||||||||
Direct Material Price Variance | Direct Material Qty variance | |||||||||||
Direct material price variance | $670.00 | F | ||||||||||
Direct material quantity variance | $480.00 | F | ||||||||||
Direct material cost variance | $1,150.00 | F |
Solution b:
Direct Labor Cost Variance | ||||||||||||
Actual Cost | Standard cost for actual quantity | Standard Cost | ||||||||||
AH * | AR = | AH * | SR = | SH * | SR = | |||||||
1330 | $16.40 | $21,812.00 | 1330 | $16.10 | $21,413.00 | 1300 | $16.10 | $20,930.00 | ||||
$399.00 | U | $483.00 | U | |||||||||
Direct Labor rate Variance | Direct Labor Efficiency Variance | |||||||||||
Direct Labor Rate variance | $399.00 | U | ||||||||||
Direct Labor Efficiency variance | $483.00 | U | ||||||||||
Direct labor cost variance | $882.00 | U |
Solution c:
Variable factory overhead controllable variance = Standard variable factory overhead cost - Actual variable factory overhead cost
= (1300*$4.8) - $6,180 = $60 F
Fixed overhead volume variance = Fixed overhead applied - budgeted fixed overhead
= (1300*$7.60) - (1360*$7.60) = $456 U
Total factory overhead cost variance = Variable factory overhead controllable variance + Fixed overhead volume variance
= $60 F + $456 U = $396 U
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