Question

# r Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Road Gripper Tire Co. manufactures...

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Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

Road Gripper Tire Co. manufactures automobile tires. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 4,160 tires were as follows:

 Standard Costs Actual Costs Direct materials 100,000 lbs. at \$6.40 101,000 lbs. at \$6.50 Direct labor 2,080 hrs. at \$15.75 2,000 hrs. at \$15.40 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 2,000 direct labor hrs.: Variable cost, \$4.00 \$8,200 variable cost Fixed cost, \$6.00 \$12,000 fixed cost

Each tire requires 0.5 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.

 Price variance \$ 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.

 Rate variance \$ Time variance \$ Total direct labor cost variance \$

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

Check My Work2 more Check My Work uses remaining.

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1)

Material Price variance = (Standard price – actual price) * Actual quantity

= (6.4-6.5)*101000= 10100 Unfavorable

Material Quantity variance = (standard quantity – Actual quantity)*standard price

= (100000-101000)*6.4 = 6400 unfavorable

Total direct material cost variance = 10100+6400 = 16500 unfavorable

2)

Labor rate variance = (standard rate – actual rate) * Actual hours

= (15.75-15.40)*2000 = -700 favorable

Labor Efficiency variance = (standard hours – Actual hours) * actual rate

= (2080-2000)*15.75 = 1260 Favorable

Total direct labor cost variance = 700+1260 = -1960 Favorable

3)

Variable overhead variance = Actual variable overhead – (standard hour* standard rate)

= 8200 – (0.50*4*4160) = 8200-8320 = - 120 Favorable

Fixed volume variance = (`capacity hours – Actual hour) * standard rate

(2000-2000)*6 = 0

Total overhead variance = variable + Fixed

= 120+0 = -120 Favorable

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