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 4,800 units of product were as follows: Standard Costs Actual Costs Direct materials 6,200 lb. at $5.00 6,100 lb. at $4.80 Direct labor 1,200 hrs. at $17.70 1,230 hrs. at $18.10 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,250 direct labor hrs.: Variable cost, $3.90 $4,630 variable cost Fixed cost, $6.20 $7,750 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. Direct materials price variance $ Direct materials 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. Direct labor rate variance $ Direct labor 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 a positive number. Variable factory overhead controllable variance $ Fixed factory overhead volume variance Total factory overhead cost variance $

Answer 1

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Part a
Standard Material Price		$         5.00
Standard Quantity		6200
Actual Quantity		6100
Actual Quantity used		6100
Actual Matrial Price		$         4.80
Material Price Variance	AQ(AP-SP)
	(Actual Price	-	Standard Price)	*	Actual Quantity
	$                                   4.80	-	$              5.00	*	6100
	$                                 1,220	Favorbale
Material Quantity Variance	SP(AQ-SQ)
	(Actual Quantity	-	Standard Qty)	*	Standard Price
	6100	-	6200	*	$               5.00
	$                                    500	Favorbale
Total Direct Material variance	Price variance+Qty/Eff Var	$       1,720	Favorable
Part b
Standard Hour Rate		$       17.70
Standard Hour		1200
Actual Hours		1230
Actual Hour Rate		$       18.10
Labor Rate Variance	AH(AR-SR)
	(Actual Rate	-	Standard Rate)	*	Actual Hours
	$                                 18.10	-	$            17.70	*	1230
	$                                    492	Unfavorable
Labor Efficiency Variance	SR(AH-SH)
	(Actual Quantity	-	Standard Qty)	*	Standard Price
	1230	-	1200	*	$             17.70
	$                                    531	Unfavorable
Total Direct Labor Varianve	Rate Variance+Eff Variance	$       1,023	Unfavorbale
Part c
Factory Overhead Cost Variance:
Variable Factory Overhead Controllable Variance:
Actual Variable Factory Overhead		$       4,630
Budgeted Variable Factory Overhead	1,200 Hours*$3.90	$       4,680
Variance - Favorable	A	$       9,310
Fixed Factory overhead Volume Variance:
Normal capacity 100%		1,250	Hours
Less: Standard for amount produced		$      -1,200
Productive capacity not used		$            50
Standard Fixed Factory ovh rate		$         6.20
Variance -Unfavorable	B	$          310
Toal Factory Overhead Variance-Favorable	A-B	$       9,000