Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Adam
ID: 2447826 • Letter: D
Question
Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis
Adamantane 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 15,000 units of product were as follows:
Each unit requires 0.2 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.
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.
c. Determine the variable factory overhead controllable variance, 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.
Standard Costs Actual Costs Direct materials 5,000 lbs. at $50.00 4,950 lbs. at $50.60 Direct labor 3,000 hrs. at $25.00 2,945 hrs. at $25.60 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 3,200 direct labor hrs.: Variable cost, $5.50 $16,680 variable cost Fixed cost, $4.00 $12,800 fixed costExplanation / Answer
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 = (Actual price - Standard Price) *Actual Quantity
Price variance = (50.60 - 50)*4950
Price variance = 2970 Unfavorable
Quantity variance = (Actual Quantity Used- Standard Quantity)Standard Price
Quantity variance = (4950 - 5000)*50
Quantity variance = -2500 Favorable
Total direct materials cost variance = (Actual price*Actual Quantity - Standard Price*Standard Quantity)
Total direct materials cost variance = (4950*50.60 - 5000*50)
Total direct materials cost variance = $ 470 Unfavorable
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 = (Actual Rate-Standard Rate)*Actual Hour
Rate variance = (25.60 - 25)*2945
Rate variance = $ 1767 Unfavorable
Time variance = (Actual Hour - Standard Hour)Standard Rate
Time variance = (2945-3000)*25
Time variance = -1375 Favorable
Total direct laborcost variance = (Actual Rate*Actual Hour - Standard Rate* Standard Hour)
Total direct laborcost variance = (2945*25.60 - 3000*25)
Total direct laborcost variance = $ 392 Unfavorable
c. Determine the variable factory overhead controllable variance, 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 = (Actual Rate*Actual Hour -Standard Rate*Actual Hour )
Variable factory overhead controllable variance = (16680 - 5.50*3000)
Variable factory overhead controllable variance = 180 Unfavorable
Fixed factory overhead volume variance = ( Budgeted Fixed Overhead - Standard Hour Allowed * Standard Rate)
Fixed factory overhead volume variance = (4*3200 - 3000*4)
Fixed factory overhead volume variance = 800 Unfavorable
Total factory overhead cost variance = (Actual Overhead - Standard Overhead rate*Standard Hour)
Total factory overhead cost variance = (16680+12800) - (5.50+4)*3000
Total factory overhead cost variance = 980 Unfavorable
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