Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Mack
ID: 2517849 • 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:
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 7,300 lb. at $5.50 7,200 lb. at $5.40 Direct labor 1,400 hrs. at $17.50 1,430 hrs. at $17.90 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,460 direct labor hrs.: Variable cost, $4.30 $5,960 variable cost Fixed cost, $6.80 $9,928 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 Quantity variance Total direct materials cost variance 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 Time variance Total direct labor cost variance 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 positive number. Variable factory overhead controllable variance Fixed factory overhead volume variance Total factory overhead cost varianceExplanation / Answer
a. Direct Materials Price Variance = (Standard Price - Actual Price) x Actual Quantity
= (5.50 - 5.40) x 7,200
= 720 Favourable
Direct Materials Quantity Variance = (Standard Quantity - Actual Quantity) x Standard Price
= (7,300 - 7,200) x 5.50
= 550 Favourable
Total Direct Materials Cost Variance = Standard Cost - Actual Cost
= 7,300 x 5.50 - 7,200 x 5.4
= 40,150 - 38,880
= 1,270 Favourable
b. Direct labor rate variance = (Actual rate - Standard rate) x Actual hours worked
= (17.90 - 17.50) x 1,430
= 572 Unfavourable or -572
Direct labor time variance = (Actual hours - Standard hours) x Standard rate
= (1,430 - 1,400) x 17.50
= 525 Unfavourable or -525
Total direct labor cost variance = Standard Cost - Actual Cost
= 1,400 x 17.50 - 1,430 x 17.90
= 24,500 - 25,597
= -1097 Unfavourable
c. Variable Factory Overhead Controllable Variance = Actual Variable Factory Overhead - Budgeted Variable Overhead Based on Standard Hours Allowed
= 5,960 - 5,600 x 0.25 x 4.30
= 5,960 - 6,020
= -60 or 60 Favourable
Fixed factory overhead volume variance = Budgeted Fixed Overhead – Standard Fixed Overhead
= 1,460 x 6.80 - 5,600 x 0.25 x 6.80
= 9,928 - 9,520
= 408 Unfavourable or -408
Total factory overhead cost variance = Standard Factory Overhead - Actual Factory Overhead
=(1,400 x 4.30 + 1,460 x 6.80) - (5,960 + 9,928)
= 15,948 - 15,888
= 60 Favourable
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