Direct Materials, Direct Labor, and Reports budgeted and actual costs for variab
ID: 2466837 • Letter: D
Question
Direct Materials, Direct Labor, and Reports budgeted and actual costs for variable and fixed factory overhead along with the related controllable and volume variances.Factory Overhead Cost Variance Analysis
Eastern Polymers, Inc., processes a base chemical into plastic. A detailed estimate of what a product should cost.Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 6,400 units of product were as follows:
Standard Costs
Actual Costs
Direct materials
8,300 lbs. at $5.8
8,200 lbs. at $5.6
Direct labor
1,600 hrs. at $18.3
1,640 hrs. at $18.7
Factory overhead
Rates per direct labor hr.,
based on 100% of normal
capacity of 1,670 direct
labor hrs.:
Variable cost, $4
$6,340 variable cost
Required:
a. Determine the direct materials Price variance is the difference between the actual and standard prices, multiplied by the actual quantity.price variance, direct materials The cost associated with the difference between the standard quantity and the actual quantity of direct materials used in producing a commodity.quantity variance, and total direct materials The difference between actual cost and the flexible budget at actual volumes.cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Price variance $
Favorable
Unfavorable
Quantity variance $
Favorable
Unfavorable
Total direct materials cost variance $
Favorable
Unfavorable
b. Determine the direct labor The cost associated with the difference between the standard rate and the actual rate paid for direct labor used in producing a commodity.rate variance, direct labor The cost associated with the difference between standard and actual hours of direct labor spent for producing a commodity.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 $
Favorable
Unfavorable
Time variance $
Favorable
Unfavorable
Total direct labor cost variance $
Favorable
Unfavorable
c. Determine variable factory overhead The difference between the actual variable overhead costs and the budgeted variable overhead for actual production.controllable variance, the fixed factory overhead The difference between the budgeted fixed overhead at 100% of normal capacity and the standard fixed overhead for the actual production achieved during the period.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 $
Favorable
Unfavorable
Fixed factory overhead volume variance $
Favorable
Unfavorable
Total factory overhead cost variance $
Favorable
Unfavorable
Feedback
Unfavorable variances can be thought of as increasing costs (a debit). Favorable variances can be thought of as decreasing costs (a credit).
The variable factory overhead controllable variance is the difference between the actual variable overhead costs and the budgeted variable overhead for actual production.
The fixed factory overhead volume variance is the difference between the budgeted fixed overhead at 100% of normal capacity and the standard fixed overhead for the actual units produced.
Standard Costs
Actual Costs
Direct materials
8,300 lbs. at $5.8
8,200 lbs. at $5.6
Direct labor
1,600 hrs. at $18.3
1,640 hrs. at $18.7
Factory overhead
Rates per direct labor hr.,
based on 100% of normal
capacity of 1,670 direct
labor hrs.:
Variable cost, $4
$6,340 variable cost
Explanation / Answer
All information are not very clear. No data related to Fixed Overhead given. Standard costs Qty /Hr Rate Amt For production units 6400 Direct Materials 8,300.0 5.80 48,140.00 Direct Labor 1,600.0 18.30 29,280.00 Variable Overhead 1,600.0 4.00 6,400.00 Actual results For production units 6400 Qty /Hr Rate Amt Direct Materials 8,200.0 5.60 45,920.00 Direct Labor 1,640.0 18.70 30,668.00 Variable Overhead 1,640.0 3.866 6,340.00 Direct Materials Price Variance= Actual Qty Used( Actual Rate-Std Rate) =8200*(5.6-5.8) = 1,640 (F) Direct Material Efficiency Variance =Std Rate ( Actual Qty used-Std qty for actual output) =5.80*(8200-8300) = 580 (F) Total Direct Material spending Variance= =48140-45920 = 2,220 (F) Direct Labor Rate Variance= Actual Hrs Used( Actual Rate-Std Rate) =1640*(18.7-18.3) = 656 (U) Direct Labor Efficiency Variance =Std Rate ( Actual Hrs used-Std Hrs for actual output) =18.30*(1640-1600) = 732 (U) Total Direct LAbor spending Variance= =30668-29280 = 1,388 (U) Variable Overhead Rate Variance= Actual Qty Used( Actual Rate-Std Rate) =1640*(3.866-4) = 220 (F) Variable Overhead Efficiency Variance =Std Rate ( Actual Qty used-Std qty for actual output) =4*(1640-1600) = 160 (U) Total Variable Overhead spending Variance= =6400-6340= 60 (F) Fixed Overhead Budget Variance = Actual Overhead- Budgeted allowance based on Std Hrs(budgeted fixed OH) No information available Fixed Overhead Volume Variance = Budgeted Allowance based on Std Hrs - Std Hrs for Actual Output*std rate No information available
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