Question

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 $6.00 8,700 lb. at $5.80 Direct labor 1,700 hrs. at $18.00 1,740 hrs. at $18.20 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,770 direct labor hrs.: Variable cost, $3.90 $6,560 variable cost Fixed cost, $6.20 $10,974 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 $ 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. Rate variance $ 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

	Standard Cost for 6800 Units			Actual for 19,500 Units
	Units	Rate	Total	Units	Rate	Total
Material	8,800	6.00	52,800.00	8,700	5.80	50,460.00
Labour	1,700	18.00	30,600.00	1,740	18.20	31,668.00
Variable Overhead	1,700	3.90	6,630.00	1,740	3.77	6,560.00
Fixed Overhead	1,770	6.20	10,974.00	1,740	6.20	10,788.00

Material price Variance=	(SP-AP)*AQ	(6-5.80)*8700	$         (1,740)	Favourable
Material Quantity Variance=	(SQ-AQ)*Sp	(8800-8700)*6	$             (600)	Favourable
total direct materials cost variance			$         (2,340)	Favourable

Labour Rate Variance	(SR-AR)*AH	(18-18.20)*1740	$               348	Unfavourable
Labour Quantity Variance	(SH-AH)*SR	(1700-1740)*18	$               720	Unfavourable
total direct labor cost variance			$            1,068	Unfavourable

Variable factory overhead controllable variance	Standard- Actual	6560-6630	$                  70	Unfavourable
Fixed factory overhead volume variance	(Actual Activity-Normal Activity)*OHR	(1740-1770)*6.20	$               186	Unfavourable
Total Factory Overhead Cost variance	Standard-Actual		$               256	Unfavourable

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