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.

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:

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 the variable factory overhead controllable variance, 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.

1. 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 $5.20		235,600 lbs. at $5.00
   Direct labor	17,500 hrs. at $18.10		17,900 hrs. at $18.50
   Factory overhead	Rates per direct labor hr.,
   	based on 100% of normal
   	capacity of 18,260 direct
   	labor hrs.:
   		Variable cost, $2.90	$50,240 variable cost
   		Fixed cost, $4.60	$83,996 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 the variable factory overhead controllable variance, 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

Larry sells three different popular dinner packages at varying price to appeal to a range of guests these are:

Help him complete the spreadsheets and then answer the questions that follow:

a. What would be Larry’s food cost percentage if 100 % of his guests chose the Yellow Rose package?

Answer:

b. What would be Larry’s food cost percentage if 100 % of his guests chose the White Rose package?

Answer:

c. What would be Larry’s food cost percentage if 100 % of his guests chose the Golden Rose package?

Answer:

d. What would be Larry’s total food cost percentage if one-third of his guests chose each of the three different packages he offers?

Answer:  

Glassworks Inc. produces two types of glass shelving, rounded edge and squared edge, on the same production line. For the current period, the company reports the following data. Rounded Edge Squared Edge Total Direct materials $ 9,600 $ 21,600 $ 31,200 Direct labor 6,100 11,900 18,000 Overhead (300% of direct labor cost) 18,300 35,700 54,000 Total cost $ 34,000 $ 69,200 $ 103,200 Quantity produced 10,700 ft. 14,100 ft. Average cost per ft. (rounded) $ 3.18 $ 4.91 Glassworks's controller wishes to apply activity-based costing (ABC) to allocate the $54,000 of overhead costs incurred by the two product lines to see whether cost per foot would change markedly from that reported above. She has collected the following information. Overhead Cost Category (Activity Cost Pool) Cost Supervision $ 2,160 Depreciation of machinery 28,840 Assembly line preparation 23,000 Total overhead $ 54,000 She has also collected the following information about the cost drivers for each category (cost pool) and the amount of each driver used by the two product lines. (Round activity rate and cost per unit answers to 2 decimal places.) Usage Overhead Cost Category (Activity Cost Pool) Driver Rounded Edge Squared Edge Total Supervision Direct labor cost ($) $ 6,100 $ 11,900 $ 18,000 Depreciation of machinery Machine hours 400 hours 700 hours 1,100 hours Assembly line preparation Setups (number) 30 times 95 times 125 times Required:

The beginning inventory of merchandise at Keats Office Supplies and data on purchases and sales for a three-month period ending May 31, 2016, are as follows:

Required:

1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 4, using the first-in, first-out method. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Merchandise Sold Unit Cost column and in the Inventory Unit Cost column.

Keats Office Supplies

Schedule of Cost of Merchandise Sold

FIFO Method

For the three months ended May 31, 2014

Purchases Cost of Merchandise Sold Inventory

Date Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost

Mar. 1 $ $

Mar. 10 $ $

Mar. 28 $ $

Mar. 30

Apr. 5

Apr. 10

Apr. 16

Apr. 28

May 5

May 14

May 25

May 30

May 31 Balances $ $

  
Required:

Almaden Hardware Store sells two product categories, tools and paint products. Information pertaining to its 2018 year-end inventory is as follows: Inventory, by Product Category Quantity Per Unit Cost Net Realizable Value Tools: Hammers 110 $ 5.70 $ 6.20 Saws 270 10.70 9.70 Screwdrivers 370 2.70 3.30 Paint products: 1-gallon cans 570 6.70 5.70 Paint brushes 110 4.70 5.20 Required: 1. Determine the carrying value of inventory at year-end, assuming the lower of cost or net realizable value (LCNRV) rule is applied to (a) individual products, (b) product categories, and (c) total inventory. 2. Assuming that the company reports an inventory write-down as a line item in the income statement, for each of the LCNRV applications determine the amount of the loss.

1.

Question 2. Harley-Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly plant in Pennsylvania. Engines are transported between the two plants using trucks, with each trip costing $1,000. The motorcycle plant assembles and sells 300 motorcycles each day. Each engine costs $500, and Harley incurs a holding cost of 20 percent per year.

A. How many engines should Harley load onto each truck?

B. What is the cycle inventory of engines at Harley?

C. Using the number of engines found in Part A, what is the total holding cost? D. Using the number of engines found in Part A, what is the total setup cost?

E. What is the total purchasing cost?

Continental Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Continental Railroad is a measure of railroad operating activity, termed "gross-ton miles," which is the total number of tons multiplied by the miles moved.

Determine the variable cost per gross-ton mile and the total fixed cost.