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 7,200 units of product were as follows:

 Standard Costs Actual Costs Direct materials 9,400 lb. at \$5.10 9,300 lb. at \$5.00 Direct labor 1,800 hrs. at \$18.20 1,840 hrs. at \$18.40 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,880 direct labor hrs.: Variable cost, \$4.80 \$8,550 variable cost Fixed cost, \$7.60 \$14,288 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 \$

a. Material price variance = (Standard price - actual price)*actual quantity

= (5.10-5)*9300 = \$930 favorable

Material quantity variance = (Standard quantity - actual quantity)*standard rate

= (9400-9300)*5.10 = \$510 favorable

Total direct materials cost variance = 9400*5.10-9300*5 = 1440 favorable

b. Labor rate variance = (standard rate - actual rate)*actual hours

= (18.20-18.40)*1840 = \$368 unfavorable

Labor efficiency variance = (standard hours - actual hours)*standard rate

= (1800-1840)*18.20= \$728 unfavorable

Total direct labor cost variance =1800*18.20-1840*18.40 = \$1096 unfavorable

c. Variable factory overhead controllable variance =

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