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 4,400 units of product were as follows: Standard Costs Actual Costs 6,200 lbs. at $5.30 1,100 hrs. at $16.60 Rates per direct labor hr., based on 100% of normal capacity of 1,150 direct labor hrs.: Variable cost, $3.60 Fixed cost, $5.70 Each unit requires 0.25 hour of direct labor. Required: Determine the direct materials price variance, direct materials quantity variance, and total direct materials cort valance. 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 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 Determine variable factory overhead controllable Varian 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

Explanation / Answer

a. Total Direct material variance = Actual cost - Standard cost

= (6100 x $5.1) - (6,200 x $5.3) = - 1,750 (Favorable

Direct Material price variance = (Actual price - Standard price) x Actual qty

= ($5.1 - $5.3) x 6100 = -$1,220 (Favorable)

Direct material Quantity variance = (Actual qty - Standard Qty) x Standard price

= (6,100 - 6,300) x $5.3 = -$530 (Faborable

b) Total direct labor variance = Actual cost - Standard Cost

= (1130 x 17) - (1100 x 16.6) = $950 (Unfavorable)

Rate variance = (Actual rate - Standard rate) x Actual hours

= ($17 - $16.6) x 1100 = $452 (Unfavorble)

Time variance = (Actual hours - Standard hours) x Standard rate

= (1130 - 1100) x $16.6 = $498 (Unfavorable)

c. Overhead variance

Variable overhead variance = Actual cost - Standard cost

= $3,920 - ($3.6 x 1,150) = -$220 (Favorable)

Fixed Overhead variance = Actual cost - Standard cost

= $6555 - (1,150 x $5.7) = 0

Total Factory overhead cost variance = Variable overhead variance + Fixed overhead variance = -$220 (Favorable)

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