Question

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Mackinaw Inc. processes a base chemical...

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 217,000 lbs. at $5.80 214,800 lbs. at $5.70
Direct labor 17,500 hrs. at $17.20 17,900 hrs. at $17.50
Factory overhead Rates per direct labor hr.,
based on 100% of normal
capacity of 18,260 direct
labor hrs.:
Variable cost, $3.60 $62,370 variable cost
Fixed cost, $5.70 $104,082 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 $ Favorable
Direct Materials Quantity Variance $ Favorable
Total Direct Materials Cost Variance $ Favorable

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 $ Unfavorable
Direct Labor Time Variance $ Unfavorable
Total Direct Labor Cost Variance $ Unfavorable

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

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