Question

# Direct Materials, Direct Labor, and Reports budgeted and actual costs for variable and fixed factory overhead...

1. 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 \$ Favorable Unfavorable Direct materials quantity variance Favorable Unfavorable Total direct materials cost variance \$ Favorable Unfavorable

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 \$ Favorable Unfavorable Direct labor time variance Favorable Unfavorable Total direct labor cost variance \$ Favorable Unfavorable

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 \$ Favorable Unfavorable Fixed factory overhead volume variance Favorable Unfavorable Total factory overhead cost variance \$ Favorable Unfavorable

 in \$ a) Material price variance 1740 F Aq*(AP-SP) 8700*(4.7-4.9) -1740 Material Qty variance 490 F SP*(AQ-SQ used) 4.9*(8700-8800) -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*(AH-SH used) 16.5*(1740-1700) 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 Budgetd-Absorbed (1770*5.8)-(6800*.25*5.8) 406 U Total factory overhead cost variance 406-60 346 U If any doubt please comment

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