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 6,800 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 9,500 lbs. at $4.80 9,400 lbs. at $4.60 Direct labor 1,700 hrs. at $17.70 1,740 hrs. at $18.10 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,770 direct labor hrs.: Variable cost, $3.90 $6,560 variable cost Fixed cost, $6.20 $10,974 fixed cost Direct Materials, Direct Labor, and Fectery Overhead Cost Variance Analyss Easten hlymen, Inc. processes a ·ch.nal rto plastic. Standa ost.nd actual cost, for Standard Costs Actual Costs 9,400 s.at $4.60 1,740 hrs, $18.10 Direct materias 9.300 s at$4.0 1.700 hrs. at $17.70 Rates per deed labor based on 10g% of normal Factory overhead of 1,770 direct Variable coat $3.90 Fosed cost. 16.20 variable cost $10.974 foxed co Each unt reovees 023 hour cf ect labor Required t-drect materials Pm.yananc, dire t materw, senatvan-. .nd tetal dret "ateral, fost yanan. Ete. fewabl.anr. " . Quantity varlance cest variance. Enter a faverable varlance as a negative umber aling a minus sign and an unfavarable variance as a Veriable factory ovrhaad centroilable vaances Fined factory overhead volume variance

Explanation / Answer

A). 1) Material Price Variance = (Standard Price - Actual Price) * Actual Quantity

= ($4.80 - $4.60) * 9400

= $1880 F

2). Material Quantity Variance = (Standard quantity - actual Quantity) * Standard Price

= (9500 - 9400) * $4.80

= $480 F

3). Total Direct Materials Cost Variance = (Standard Quantity * Standard Price) - (Actual Quantity * Actual Price)

= (9500 * $4.80) - (9400 * $4.60)

= $45600 - $43240

= $2360 F

=

B). 1). Labor Rate Variance = (Standard Rate - Actual Rate) * Actual Hours

= ($17.70 - $18.10) * 1740

= $696 U

2). Labor Time Variance = (Standard Hours - Actual Hours) * Standard Rate

= (1700 - 1740) * $17.70

= $708 U

3). Total Direct Labor Variance = (Standard Hours * Standard Rate) - (Actual Hours * Actual Rate)

= (1700 * $17.70) - (1740 * $18.10)

= $30090 - $31494

= $1404 U

C). 1). Variable Overhead Control Variance =

Variable overhead control variance = (Standard variable cost per hour * Standard hours allowed for direct labor)

- Actual Variable Cost

= ($3.90*1700) - $6560

= $70 F

2). Fixed Overhead Control Variance = (Standard Fixed cost per hour * Standard hours allowed for direct labor at

normal capacity) - Actual Fixed cost

= ($6.20 * 1770) - $10974

= $0

Total Factory Overhead Cost Variance = Variable Overhead control Variance + Fixed Overhead control variance

= $70 + $0

= $70 F

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