Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Mack
ID: 2431120 • Letter: D
Question
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 5,600 units of product were as follows:
Standard Costs Actual Costs
Direct materials 7,300 lb. at $6.00 7,200 lb. at $5.90
Direct labor 1,400 hrs. at $17.40 1,430 hrs. at $17.70
Factory overhead Rates per direct labor hr.,
based on 100% of normal
capacity of 1,460 direct
labor hrs.:
Variable cost, $4.40 $6,100 variable cost
Fixed cost, $7.00 $10,220 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 $ U/F
Quantity variance $ U/F
Total direct materials cost variance $ U/F
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 $ U/F
Time variance $ U/F
Total direct labor cost variance $ U/F
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 $ U/F
Fixed factory overhead volume variance $ U/F
Total factory overhead cost variance $ U/F
Explanation / Answer
a. Direct materials Variance Price variance Actual quantity*(Actual price-Standard price) = 7200*(5.90-6) = 720 U Quantity variance Standard price*(Actual quantity-Standard quantity) = 5.9*(7200-7300) = -590 F Total direct materials cost variance Actual direct material cost-Standard direct material cost = 7200*5.90-7300*6 Or Price variance+Quantity variance = 720-(-590) = $1320 -1320 F b. Direct Labor Lariance Rate variance Actual hours*(Actual rate -Standard rate) = 1430*(17.70-17.40) = 429 U Time variance Standard rate*(Actual hours-Standard hours) = 17.40*(1430-1400) = 522 U Total direct labor cost variance Actual direct labor cost-Standard direct labor cost = 1430*17.79-1400*17.40 Or Rate variance+Time variance = 429+522= 951 951 U c) Overhead variances: Variable factory overhead controllable variance Actual variable overhead-Standard DL hours*Standard VOH rate = 6100-1400*4.40 = -60 F Fixed factory overhead volume variance Budgeted Fixed overhead-Overhead applied = 10220-1400*7 420 U Total factory overhead cost variance Actual overhead-Overhead applied = 6100+10220-1400*11.40 = 32280 U
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