Question

3.

At the beginning of June, Kimber Toy Company budgeted 19,000 toy action figures to be manufactured in June at standard direct materials and direct labor costs as follows:

Direct materials	$19,000
Direct labor	9,500
Total	$28,500

The standard materials price is $0.50 per pound. The standard direct labor rate is $10.00 per hour. At the end of June, the actual direct materials and direct labor costs were as follows:

Actual direct materials	$17,000
Actual direct labor	8,500
Total	$25,500

There were no direct materials price or direct labor rate variances for June. In addition, assume no changes in the direct materials inventory balances in June. Kimber Toy Company actually produced 16,500 units during June.

Determine the direct materials quantity and direct labor time variances. Round your per unit computations to two decimal places, if required. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Direct materials quantity variance	$. ?	FAVORABLE OR UNFAVORABLE
Direct labor time variance	$ ?	FAVORABLE OR UNFAVORABLE

6.

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 6,800 units of product were as follows:

	Standard Costs		Actual Costs
Direct materials	8,800 lb. at $5.40		8,700 lb. at $5.20
Direct labor	1,700 hrs. at $16.80		1,740 hrs. at $17.20
Factory overhead	Rates per direct labor hr.,
	based on 100% of normal
	capacity of 1,770 direct
	labor hrs.:
		Variable cost, $3.50	$5,890 variable cost
		Fixed cost, $5.50	$9,735 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	$	FAVORABLE OR UNFAVORABLE
Direct materials quantity variance		FAVORABLE OR UNFAVORABLE
Total direct materials cost variance	$	FAVORABLE OR UNFAVORABLE

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	$	FAVORABLE OR UNFAVORABLE
Direct labor time variance		FAVORABLE OR UNFAVORABLE
Total direct labor cost variance	$	FAVORABLE OR UNFAVORABLE

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	$	FAVORABLE OR UNFAVORABLE
Fixed factory overhead volume variance		FAVORABLE OR UNFAVORABLE
Total factory overhead cost variance	$	FAVORABLE OR UNFAVORABLE

Answer 1

3	Direct materials quantity variance=SR*(SQ-AQ)
	If the answer is positive,variance is favorable.Otherwise,unfavorable
	Where
	SR=Standard Rate=$0.50 per pound
	SQ=Standard Quantity=Actual production*Standard quantity of materials rquired per Toy
	Standard quantity of materials rquired per Toy=Budgeted materials requirement/Budgeted toy production
	Budgeted materials requirement=Budgeted Direct materials cost/SR=19000/0.50=38000 pound
	Standard quantity of materials rquired per Toy=38000/19000=2 pounds per toy
	SQ=Standard Quantity=16500*2=33000 pounds
	AQ=Material used=Actual direct materials cost/SR=17000/0.50=34000 pounds
	Direct materials Quantity variance=0.50*(33000-34000)=-500=$ 500 Unfavorable
	Direct labor time variance=SR*(SLH-ALH)
	If the answer is positive,variance is favorable.Otherwise,unfavorable
	Where
	SR=Standard labor rate per hour=$10
	SLH=Standard labor hours=Actual production*Standard quantity of labor hours required per toy
	Standard quantity of labor hours required per toy=Budgeted labor hours requirement/Budgeted toy production
	Budgeted labor hours requirement=Budgeted Direct labor cost/SR=9500/10=950 hours
	Standard quantity of labor hours required per toy=950/19000=0.05
	SLH=Standard labor hours=16500*0.05=825 hours
	ALH=Number of labor hours worked=Actual direct labor cost/SR=8500/10=850 hours
	Direct labor efficiency variance=10*(825-850)=-250=$ 250 Unfavorable
6	Direct materials price variance=AQ*(SR-AR)
	If the answer is positive,variance is favorable.Otherwise,unfavorable
	Where
	AQ=Material used=8700 lb.
	SR=Standard Rate=$5.40
	AR=Actual rate=$5.20
	Direct materials price variance=8700*(5.40-5.20)=1740=$ 1740 Favorable
	Direct materials quantity variance=SR*(SQ-AQ)
	If the answer is positive,variance is favorable.Otherwise,unfavorable
	Where
	SR=Standard Rate=$5.40
	SQ=Standard Quantity=8800 lb.
	AQ=Material used=8700 lb.
	Direct materials Quantity variance=5.40*(8800-8700)=540=$ 540 Favorable
	Direct labor rate variance=ALH*(SR-AR)
	If the answer is positive,variance is favorable.Otherwise,unfavorable
	Where
	ALH=Number of labor hours worked=1740
	SR=Standard labor rate per hour=$16.80
	AR=Actual labor rate per hour=$17.20
	Direct labor rate variance=1740*(16.80-17.20)=-696=$ 696 Unfavorable
	.
	Direct labor efficiency variance=SR*(SLH-ALH)
	If the answer is positive,variance is favorable.Otherwise,unfavorable
	Where
	SR=Standard labor rate per hour=$16.80
	SLH=Standard labor hours=1700 hrs.
	ALH=Number of labor hours worked=1740
	Direct labor efficiency variance=16.80*(1700-1740)=-672=$ 672 U
	Factory overhead cost variances:
	Variable factory overhead controllable variance=Actual variable factory overhead cost incurred-Budgeted variable factory overhead at 100% capacity
	If the answer is negative, variance is favorable.Otherwise unfavorable.
	Budgeted variable factory overhead at 100% capacity=1770*3.50=$ 6195
	Variable factory overhead controllable variance=5890-6195=-305=$ 305 Favorable
	Fixed factory overhead volume variance=Productive capacity not used*Standard fixed factory overhead rate
	If the answer is negative, variance is favorable.Otherwise unfavorable.
	Productive capacity not used=Productive capacity at 100%-Budgeted level of production=1770-1700=70 hours
	Fixed factory overhead volume variance=70*5.50=385=$ 385 Unfavorable
	Total factory overhead cost variance=Variable factory overhead controllable variance+Fixed factory overhead volume variance
	Total factory overhead cost variance=-305+385=80=$ 180 Unfavorable