Question

1. Direct Materials, Direct Labor, and Reports budgeted and actual costs for variable and fixed factory overhead along with the related controllable and volume variances.Factory Overhead Cost Variance Analysis

   Mackinaw Inc. processes a base chemical into plastic. A detailed estimate of what a product should cost.Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 7,200 units of product were as follows:

   	Standard Costs		Actual Costs
   Direct materials	9,400 lb. at $5.20		9,300 lb. at $5.00
   Direct labor	1,800 hrs. at $16.70		1,840 hrs. at $16.90
   Factory overhead	Rates per direct labor hr.,
   	based on 100% of normal
   	capacity of 1,880 direct
   	labor hrs.:
   		Variable cost, $4.50	$8,020 variable cost
   		Fixed cost, $7.10	$13,348 fixed cost

   Each unit requires 0.25 hour of direct labor.

   Required:

   a. Determine the direct materials Price variance is the difference between the actual and standard prices, multiplied by the actual quantity.price variance, direct materials The cost associated with the difference between the standard quantity and the actual quantity of direct materials used in producing a commodity.quantity variance, and total direct materials The difference between actual cost and the flexible budget at actual volumes.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	$	Favorable Unfavorable
   Direct materials quantity variance		Favorable Unfavorable
   Total direct materials cost variance	$	Favorable Unfavorable

   b. Determine the direct labor The cost associated with the difference between the standard rate and the actual rate paid for direct labor used in producing a commodity.rate variance, direct labor The cost associated with the difference between standard and actual hours of direct labor spent for producing a commodity.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	$	Favorable Unfavorable
   Direct labor time variance		Favorable Unfavorable
   Total direct labor cost variance	$	Favorable Unfavorable

   c. Determine variable factory overhead The difference between the actual variable overhead costs and the budgeted variable overhead for actual production.controllable variance, the fixed factory overhead The difference between the budgeted fixed overhead at 100% of normal capacity and the standard fixed overhead for the actual production achieved during the period.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	$	Favorable Unfavorable
   Fixed factory overhead volume variance		Favorable Unfavorable
   Total factory overhead cost variance	$	Favorable Unfavorable

Answer 1

Direct Materials Price Variance	[(Actual price-Standard Price)*Actual Quantity]
	[($5 - $5.20) * 9300 lb]		$ 1,860	F
Direct Materials Quantity Variance	[(Actual Quantity-Standard Quantity])* Standard Price]
	[(9300 - 9400) * $5.20]		$520	F
Total Direct Materials Cost Variance	(Direct Materials Price Variance+Direct Materials Quantity Variance)		$2,380	F
	($1860 F + $520 F)
Direct Labor Rate Variance	[(Actual rate per hour-Standard rate per hour)*Actual hours]
	[($16.90 - $16.70) * 1840]		$368	U
Direct Time Variance Variance	[(Actual direct labor hours-Standard direct labor hours])* Standard rate per hour]
	[(1840 - 1800) * $16.70]		$668	U
Total Direct Labor Cost Variance	(Direct Labor Rate Variance+Direct Time Variance Variance)		$1,036	U
	($368 U + $668 U)
Variable factory overhead controllable variance	Actual Variable OH	$8,020
	Budgeted Variable OH =(7200*0.25)*$4.50	$8,100
	Variable factory overhead controllable variance	=	$80	F
Fixed factory overhead volume variance	Budgeted Fixed OH	$13,348
	Fixed OH Cost applied (7200*0.25)*$7.10	$12,780
	Fixed factory overhead volume variance	=	$568	U
Total factory overhead cost variance	Variable Factory Overhead Controllable Variance + Fixed Factory Overhead Volume Variance
	($80 F + $568 U)		$488	U