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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