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 5,200 units of product were as follows:

	Standard Costs		Actual Costs
Direct materials	6,800 lb. at $5.50		6,700 lb. at $5.40
Direct labor	1,300 hrs. at $18.60		1,330 hrs. at $18.80
Factory overhead	Rates per direct labor hr.,
	based on 100% of normal
	capacity of 1,360 direct
	labor hrs.:
		Variable cost, $3.10	$3,990 variable cost
		Fixed cost, $4.90	$6,664 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	$fill in the blank 1
Direct materials quantity variance	fill in the blank 3
Total direct materials cost variance	$fill in the blank 5

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	$fill in the blank 7
Direct labor time variance	fill in the blank 9
Total direct labor cost variance	$fill in the blank 11

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	$fill in the blank 13
Fixed factory overhead volume variance	fill in the blank 15
Total factory overhead cost variance	$fill in the blank 17

Answer 1

	L	M	N=L*M
Mackinaw	Input required	Rate per unit	Amount $
Direct Material Variance
Standard Price allowed for Actual Output at Standard Price	6,800.00	5.50	37,400.00	A
Actual Quantity of Input used at Standard Price	6,700.00	5.50	36,850.00	B
Actual cost of materials	6,700.00	5.40	36,180.00	C
Quantity Variance (B-A)			550.00	Favorable
Price Variance (C-B)			670.00	Favorable
Total Material Variance			1,220.00	Favorable
Direct Labor Variance
Standard Hours allowed for Actual Output at Standard Rate	1,300.00	18.60	24,180.00	D
Actual Hours of Input, at Standard Rate	1,330.00	18.60	24,738.00	E
Actual Hours of Input, at Actual Rate	1,330.00	18.80	25,004.00	F
Efficiency Variance (E-D)			558.00	Unfavorable
Price Variance (F-E)			266.00	Unfavorable
Total Labor Variance (F-D)			824.00	Unfavorable
Variable Overhead Variance
Standard Hours allowed for Actual Output at Standard Rate	1,330.00	3.10	4,123.00	G
Actual Hours of Input, at Actual Rate			3,990.00	I
Variable factory overhead controllable variance (I-G)			133.00	Favorable
Fixed Overhead Variance	Amount $
Labor hours used	1,330.00
Fixed Overhead rate	4.90
Fixed Overhead applied	6,517.00
Actual factory overhead	6,664.00
Fixed overhead volume variance	147.00	Unfavorable
Standard Labor hours	1,300.00
Fixed Overhead rate	4.90
Standard Fixed Overhead	6,370.00
Actual factory overhead	6,664.00
Fixed overhead cost variance	294.00	Unfavorable