Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis East
ID: 2469533 • Letter: D
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 4,800 units of product were as follows:
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.
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 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.
Standard Costs Actual Costs Direct materials 6,700 lbs. at $4.80 6,600 lbs. at $4.70 Direct labor 1,200 hrs. at $17.00 1,230 hrs. at $17.50 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,250 direct labor hrs.: Variable cost, $4.20 $4,990 variable cost Fixed cost, $6.60 $8,250 fixed costExplanation / Answer
a)Price variance = AQ[AR-SR]
= 6600 [4.7 - 4.8 ]
= 600 * -.1
= - 660 F
Quantity variance = SR [AQ-SQ]
= 4.8 [6600-6700]
= 4.8 * -100
= - 480F
Total variance = -660 -480 = -1140F
B)Rate variance = AH[AR -SR]
= 1230 [17.5 -17]
= 1230 *.5 = 615 U
Efficiency variance = 17 [1230 -1200]
= 17 *30 = 510 U
Total labor cost variance = 510 +615 = 1125 U
C)Variable factory overhead controllable variance = Actual -standard overhead
= 4990 - (1200*4.2)
=4990 - 5040
=- 50 F
Fixed factory overhead volume variance = Budgeted overhead -standard overhead
= (1250*6.6) - (1230 * 6.6)
= 8250 - 8118
= 132 U
Total Facotry overhead variance = Actual - Standard overhead for actual output
= (4990+8250) - [8250 + (1230 * 4.2)]
= 13240- [8250+ 5166]
= 13240 - 13416
= - 176 F
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