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 5,600 units of product were as follows:

Standard Costs Actual Costs

Direct materials 7,300 lb. at $6.00 7,200 lb. at $5.90

Direct labor 1,400 hrs. at $17.40 1,430 hrs. at $17.70

Factory overhead Rates per direct labor hr.,

based on 100% of normal

capacity of 1,460 direct

labor hrs.:

Variable cost, $4.40 $6,100 variable cost

Fixed cost, $7.00 $10,220 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.

Price variance $ U/F

Quantity variance $ U/F

Total direct materials cost variance $ U/F

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.

Rate variance $ U/F

Time variance $ U/F

Total direct labor cost variance $ U/F

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 $ U/F

Fixed factory overhead volume variance $ U/F

Total factory overhead cost variance $ U/F

Answer 1

a. Direct materials Variance
Price variance	Actual quantity*(Actual price-Standard price) = 7200*(5.90-6) =	720	U
Quantity variance	Standard price*(Actual quantity-Standard quantity) = 5.9*(7200-7300) =	-590	F
Total direct materials cost variance	Actual direct material cost-Standard direct material cost = 7200*5.90-7300*6 Or Price variance+Quantity variance = 720-(-590) = $1320	-1320	F
b. Direct Labor Lariance
Rate variance	Actual hours*(Actual rate -Standard rate) = 1430*(17.70-17.40) =	429	U
Time variance	Standard rate*(Actual hours-Standard hours) = 17.40*(1430-1400) =	522	U
Total direct labor cost variance	Actual direct labor cost-Standard direct labor cost = 1430*17.79-1400*17.40 Or Rate variance+Time variance = 429+522= 951	951	U
c) Overhead variances:
Variable factory overhead controllable variance	Actual variable overhead-Standard DL hours*Standard VOH rate = 6100-1400*4.40 =	-60	F
Fixed factory overhead volume variance	Budgeted Fixed overhead-Overhead applied = 10220-1400*7	420	U
Total factory overhead cost variance	Actual overhead-Overhead applied = 6100+10220-1400*11.40 =	32280	U