Direct Materials, Direct Labor, and Reports budgeted and actual costs for variable and fixed factory overhead along with the related controllable and volume variances.Factory Overhead Cost Variance Analysis
Mackinaw Inc. processes a base chemical into plastic. A detailed estimate of what a product should cost.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 $4.90  8,700 lb. at $4.70  
Direct labor  1,700 hrs. at $16.50  1,740 hrs. at $16.90  
Factory overhead  Rates per direct labor hr.,  
based on 100% of normal  
capacity of 1,770 direct  
labor hrs.:  
Variable cost, $3.70  $6,230 variable cost  
Fixed cost, $5.80  $10,266 fixed cost 
Each unit requires 0.25 hour of direct labor.
Required:
a. Determine the direct materials Price variance is the difference between the actual and standard prices, multiplied by the actual quantity.price variance, direct materials The cost associated with the difference between the standard quantity and the actual quantity of direct materials used in producing a commodity.quantity variance, and total direct materials The difference between actual cost and the flexible budget at actual volumes.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 The cost associated with the difference between the standard rate and the actual rate paid for direct labor used in producing a commodity.rate variance, direct labor The cost associated with the difference between standard and actual hours of direct labor spent for producing a commodity.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 The difference between the actual variable overhead costs and the budgeted variable overhead for actual production.controllable variance, the fixed factory overhead The difference between the budgeted fixed overhead at 100% of normal capacity and the standard fixed overhead for the actual production achieved during the period.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  $ 

in $  
a) Material price variance  1740  F 
Aq*(APSP)  
8700*(4.74.9)  1740  
Material Qty variance  490  F 
SP*(AQSQ used)  
4.9*(87008800)  490  
Total direct material cost variance 1740+490  2230  F 
ans b  
Labor rate variance  
(AR*AH)(AH*SR)  
(1740*16.9)(1740*16.5)  696  U 
Labor time varaince  660  U 
SP*(AHSH used)  
16.5*(17401700)  
Total direct labor cost variance  
696+660  1356  U 
ans c  
Variable factory overhead controllable variance  60  F 
(AVR*AH)(SH*SVR)  
6230(6800*.25*3.7)  60  
Fixed overhead volume variance  
BudgetdAbsorbed  
(1770*5.8)(6800*.25*5.8)  406  U 
Total factory overhead cost variance  
40660  346  U 
If any doubt please comment 
Get Answers For Free
Most questions answered within 1 hours.