Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis East
ID: 2595730 • 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 6,200 lbs. at $5.60 6,100 lbs. at $5.40 Direct labor 1,200 hrs. at $17.60 1,230 hrs. at $17.80 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,250 direct labor hrs.: Variable cost, $4.10 $4,870 variable cost Fixed cost, $6.50 $8,125 fixed costExplanation / Answer
Answer:
A)
Price variance
1220
Favorable
Quantity variance
560
Favorable
Total direct materials cost variance
1780
Favorable
B)
Rate variance
246
Unfavorable
Time variance
528
Unfavorable
Total direct labor cost variance
774
Unfavorable
C)
Variable factory overhead controllable variance
50
Favorable
Fixed factory overhead volume variance
325
Unfavorable
Total factory overhead cost variance
275
Unfavorable
Working notes for the answer:
Material price variance:
Material price variance
= (Standard price – Actual price) * Actual quantity
= ($5.60 - $5.40) * 6100 lbs
= $0.20* 6100 lb
= $1220 favorable
Material quantity variance:
Material quantity variance
= (Standard quantity – Actual quantity) * Standard price
= (6,200 lbs – 6,100 lbs) * 5.60
= 100 lbs * $5.6
= $560 Favorable
Total direct materials cost variance:
Total direct materials cost variance
= (Standard quantity*Standard price) – (Actual quantity*Actual price)
= (6200*$5.6) – (6100*5.40)
= $34720-32940
= $ 1780 favorable
________________________________________________
b)
Labor rate variance:
Labor rate variance
= (Standard rate – Actual rate) * Actual hours
= ($17.60 - $17.80) * 1230 hours
=- $0.20*1230 hours
= $246 (Unfavorable)
Labor time variance or Labor efficiency variance:
Labor time variance
= (Standard hours – Actual hours) * Standard rate
= (1200 hours – 1230 hours) * $17.60
= - 30 hours * $17.60
= - 528 (Unfavorable)
Total direct labor variance:
Total direct labor variance
= (Standard hours * Standard rate) – (Actual hours * Actual rate)
= (1200*$17.60) – (1230*$17.90)
= $21120-218
= $774 (unfavorable)
_____________________________________________
c)
Variable overhead control variance:
Variable overhead control variance
= (Standard variable cost per hour * Standard hours allowed for direct labor) – Actual variable cost
= ($4.10 * 1200 direct labor hours) - $4870
= $4920 - $4870
= $50 Favorable
Fixed overhead control variance:
Fixed overhead control variance
= (Standard fixed cost per hour * Standard hours allowed for direct labor at normal capacity) – Actual fixed cost
= ($6.50 * 1200 direct labor hours) - $8125
= $7800-8125
= $ 325 U
Total factory overhead cost variance:
Total factory overhead cost variance
= Variable overhead control variance + Fixed overhead control variance
= $50 + (325)
= $275 (Unfavorable).
Price variance
1220
Favorable
Quantity variance
560
Favorable
Total direct materials cost variance
1780
Favorable
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