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 6,000 units of product were as follows:
|Standard Costs||Actual Costs|
|Direct materials||7,800 lb. at $5.60||7,700 lb. at $5.50|
|Direct labor||1,500 hrs. at $17.70||1,530 hrs. at $18.10|
|Factory overhead||Rates per direct labor hr.,|
|based on 100% of normal|
|capacity of 1,560 direct|
|Variable cost, $3.20||$4,750 variable cost|
|Fixed cost, $5.10||$7,956 fixed cost|
Each unit requires 0.25 hour of direct labor.
a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
|Direct materials price variance||$|
|Direct materials quantity variance|
|Total direct materials cost variance||$|
b. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
|Direct labor rate variance||$|
|Direct labor time variance|
|Total direct labor cost variance||$|
c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
|Variable factory overhead controllable variance||$|
|Fixed factory overhead volume variance|
|Total factory overhead cost variance||$|
A) Direct material price variance= (actual price - standard price )*actual quantity
Direct material price variance= (5.5 - 5.6)*7,700= -$770 favorable
Direct material quantity variance= ((actual quantity - standard quantity)*standard price
Direct material quantity variance= (7700 - 7800)* 5.60=-$560 favorable
Total direct material variance= -770 + -560 = -1330 favorable
B)Direct labor efficiency variance= (AQ - SQ)*standard rate
Direct labor efficiency variance= (1530 - 1500)*17.70= $531 unfavorable
Direct labor price variance= (AR - SR)*AQ
Direct labor price variance= (18.10 - 17.7*1530= $612 unfavorable
Total direct labor variance= 531 + 612 = $1,143 unfavorable
C) Variable factory overhead controllable variance= ($4,750 - $3.2*1560 )= -$242 favorable
Fixed factory overhead volume variance= (5.1 *1560 - $7,956)= 0
Total factory overhead variance= -$242 favorable
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