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|
|Variable cost, $4.80||$8,550 variable cost|
|Fixed cost, $7.60||$14,288 fixed cost|
Each unit requires 0.25 hour of direct labor.
a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
|Direct materials price variance||$|
|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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