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 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 labor hrs.: 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.

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 \$ 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 \$

#### Homework Answers

Answer #1

Answer:

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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