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Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Mackinaw Inc. processes a base chemical...

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:

Standard Costs Actual Costs
Direct materials 238,000 lbs. at $6.00 235,600 lbs. at $5.90
Direct labor 17,500 hrs. at $16.60 17,900 hrs. at $16.80
Factory overhead Rates per direct labor hr.,
based on 100% of normal
capacity of 18,260 direct
labor hrs.:
Variable cost, $4.70 $81,430 variable cost
Fixed cost, $7.40 $135,124 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 Material Price Variance $ Favorable
Direct Materials Quantity Variance $ Favorable
Total Direct Materials Cost Variance $ Favorable

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 $ Unfavorable
Direct Labor Time Variance $ Unfavorable
Total Direct Labor Cost Variance $ 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
Fixed factory overhead volume variance $ Unfavorable
Total factory overhead cost variance $ Unfavorable

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