Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis East

Question

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

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 6,800 units of product were as follows:

Each unit requires 0.25 hour of direct labor.

Required:

a. Determine the price variance, quantity variance, and total direct materials cost variance. Use the minus sign to enter favorable variances as negative numbers.

b. Determine the rate variance, time variance, and total direct labor cost variance. Use the minus sign to enter favorable variances as negative numbers.

c. Determine variable factory overhead Controllable Variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Use the minus sign to enter favorable variances as negative numbers.

Standard Costs Actual Costs Direct materials 8,800 lbs. at $4.70 8,700 lbs. at $4.50 Direct labor 1,700 hrs. at $17.50 1,740 hrs. at $17.80 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,770 direct labor hrs.: Variable cost, $3.50 $5,890 variable cost Fixed cost, $5.50 $9,735 fixed cost

Explanation / Answer

a. Determine theprice variance, quantity variance, and totaldirect materialscost variance. Use the minus sign to enter favorable variances asnegative numbers.

Price variance: $__488________________ Unfavorable

2,440 X ($8.30 - $8.10) = $488 Unfavorable

Quantity variance: $_____-$486______________ Favorable

(2,440 - 2,500) X $8.10 = -$486 Favorable


Total direct materials cost variance: $____2____________ unfavorable

$488 - $486 = $2
Also (2440 X $8.3) - (2500 X $8.1) = $2

b. Determine the rate variance, time variance, and total direct labor cost variance. Use the minus sign to enter favorable variances as negative numbers.

Rate variance: $____675__________ Unfavorable

3750 X ($17.68 - $17.50) = $675


Time variance: $____-875__________ Favorable

(3750 - 3,800) X $17.50 = -$875


Total direct labor cost variance: $_____-$200________ Favorable

$675 - $875 = -$200 Favorable
Also (3750 X $17.68) - (3800 X $17.50) = -$200 Favorable


c. Determine variable factory overhead Controllable Variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Use the minus sign to enter favorable variances as negative numbers.

Variable factory overhead controllable variance: $________-260___________ Favorable

$8,100 - (3,800 X $2.20) = -$260


Fixed factory overhead volume variance: $_______350_________ Unfavorable

$13,650 - (3,800 X $3.50) = $350

Total factory overhead cost variance: $_______90__________ Unfavorable

$350 - $260 = $90
Also ($13,650 + $8,100) - (3800 X ($3.50+ $2.20) = 90 Unfavorable

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