Question

1. PR.22-03A.ALGO (Algorithmic) 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, direct labor, and factory overhead incurred for the manufacture of 70,000 units of product were as follows: Standard Costs Actual Costs Direct materials 224,000 lbs. at $4.90 221,800 lbs. at $4.70 Direct labor 1 7,500 hrs. at $16.20 17,900 hrs. at $16.60 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 18,260 direct labor hrs.: Variable cost, $4.30 $74,500 variable cost Fixed cost, $6.80 $124,168 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. Direct Material Price Variance Direct Materials 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. Direct Labor Rate Variance $ Direct Labor 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

Answer 1

Direct Material Price Variance	=	(Standard Price - Actual Price) x Actual Quantity
	=	($ 4.90 - $ 4.70) x 221800
	=	$ 44,360.00	(F)
Direct Material Quan. Variance	=	(Standard Quantity - Actual Quantity) x Standard Price
	=	(224000 - 221800) x $ 4.90
	=	$ 10,780.00	(F)
Total Direct Material Cost Variance	=	Standard Cost - Actual Cost
	=	(224000 x $ 4.90) - (221800 x $ 4.70)
	=	$ 55,140.00	(F)
Direct Labor Rate Variance	=	(Standard Rate - Actual Rate) x Actual Hours
	=	($ 16.20 - $ 16.60) x 17900
	=	$   7,160.00	(U)
Direct Labor Time Variance	=	(Standard Hours - Actual Hours) x Standard Rate
	=	(17500 - 17900) x $ 16.20
	=	$   6,480.00	(U)
Total Direct Labor Cost Variance	=	Standard Cost - Actual Cost
	=	(17500 x $ 16.20) - (17900 x $ 16.60)
	=	$ 13,640.00	(U)