Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Mack

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 70,000 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 189,000 lbs. at $4.90 187,100 lbs. at $4.80 Direct labor 17,500 hrs. at $17.90 17,900 hrs. at $18.30 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 18,260 direct labor hrs.: Variable cost, $3.10 $53,710 variable cost Fixed cost, $4.90 $89,474 fixed cost

Explanation / Answer

a. Material:

b. Labor:

c. Overhead:

Variable overhead:

Fixed overhead:

Total factory overhead cost variance= variable OH cost variance+fixed overhead cost variance= 540- 3724= -3184= 3184U

Standard quantity Standard rate Standard cost Actual quantity Actual rate Actual cost SQ SP SC AQ AP AC 1,89,000.00 4.90 9,26,100.00 1,87,100.00 4.8 8,98,080.00 Total material cost/spending variance SQ*SP - AQ*AP 926100-898080 28020 28020 F Material price variance AQ*(SP-AP) 187100*(4.9-4.8) 18710 18710 F Material quantity variance SP*(SQ-AQ) 4.9*(189000-187100) 9310 9310 F

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