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:

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.

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.

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.

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 4,800 units of product were as follows: Standard Costs Actual Costs Direct materials 6,200 lb. at $5.00 6,100 lb. at $4.80 Direct labor 1,200 hrs. at $17.70 1,230 hrs. at $18.10 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,250 direct labor hrs.: Variable cost, $3.90 $4,630 variable cost Fixed cost, $6.20 $7,750 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 $ Direct materials 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. Direct labor rate variance $ Direct labor 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 $

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:

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.

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.

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.

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 7,200 units of product were as follows:

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.

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.

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.

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 4,400 units of product were as follows:

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.

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.

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.

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 78,000 units of product were as follows: Standard Costs Actual Costs Direct materials 265,200 lbs. at $5.80 262,500 lbs. at $5.70 Direct labor 19,500 hrs. at $16.20 19,950 hrs. at $16.50 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 20,350 direct labor hrs.: Variable cost, $4.70 $90,730 variable cost Fixed cost, $7.40 $150,590 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 $ Direct Materials 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. Direct Labor Rate Variance $ Direct Labor 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 $

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:

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.

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.

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.

The following information for the year 2019 is provided by Tromben Ltd:

Question 1 – Identification of types of costs

From the information provided, calculate the following costs:

Question 2 – Calculation of OH rates

Assume Tromben Ltd increased the total indirect costs to $1,572,000.

Calculate the total overhead rates using:

1. DL hours as the cost driver
2. Machine hours as the cost driver

Question 3 – Calculation of cost and price charged for a job

The company has received an inquiry about a sophisticated product which is estimated to take 84 direct labour hours and 12 machine hours. This product requires two components at a cost of $80 each plus other materials costing $140.

Required:

1. What would be the cost of this job, AND
2. What would be the price (charge to the client) if the firm applies 75% mark-up on cost:

• Assuming the firm used DL hours as the cost driver
• Assuming the firm used machine hours as the cost drive

3. Why are the prices charged to the customer for the same product different? Explain in one sentence.

Statement of Cost of Goods Manufactured for a Manufacturing Company

Cost data for Johnstone Manufacturing Company for the month ended March 31 are as follows:

InventoriesMarch 1March 31

Materials$149,750 $130,280

Work in process103,330 89,890

Finished goods77,870 88,590

Direct labor$269,550

Materials purchased during March287,520

Factory overhead incurred during March:

Indirect labor28,750

Machinery depreciation17,370

Heat, light, and power5,990

Supplies4,790

Property taxes4,190

Miscellaneous costs7,790

a. Prepare a cost of goods manufactured statement for March.

Johnstone Manufacturing Company

Statement of Cost of Goods Manufactured

For the Month Ended March 31

$

Direct materials:

$

$

$

Factory overhead:

$

Total factory overhead

Total manufacturing costs incurred during March

Total manufacturing costs$

Cost of goods manufactured$

b. Determine the cost of goods sold for March.
$

At the current level of output, a profit-maximizing firm in a competitive market earns average revenue of $25, has an average total cost of $22 and an average variable cost of $17. If the firm's marginal cost curve is equal to its average total cost curve at an output level of 20,000 units, then the firm earns profit of $60,000 at its current level of output.

True

False

The short-run supply for a firm in a perfectly competitive market will not be influenced by the size of fixed costs if price is less than average total cost but more than average variable cost at the profit maximizing quantity.

True

False

For a firm in a perfectly competitive market the price of the good is always equal to marginal revenue, but less than average revenue and equilibrium market price

True

False