Direct Materials and Direct Labor, Variance Analysis; Factory Overhead Cost Variance Analysis Route 66 Tire Co. manufactures automobile tires. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 6,000 tires were as follows: Standard Costs Actual Costs Direct materials 7,800 lbs. at $5.40 7,700 lbs. at $5.30 Direct Labor 1,500 hrs. at $17.90 1,530 hrs. at $18.20 Factory Overhead Rates per direct labour hr., based on 100% of normal capacity of 1,560 direct labor hrs. Variable Cost, $3.50 $5,200 Variable Cost Fixed Cost, $5.50 $8,560 Fixed Cost Each tire requires 0.25 hours of direct labor. Required: a. Determine the price variance, quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount. Price variance $_____ favorable/unfavorable Quantity variance _ favorable/unfavorable Total direct materials cost variance $_ favorable/unfavorable b. Determine the rate variance, time variance, and total direct labor cost variance. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount. Rate variance $_ favorable/unfavorable Time variance _ favorable/unfavorable Total direct labor cost variance $_ favorable/unfavorable 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 amount, and an unfavorable variance as a positive amount. Variable factory overhead controllable variance $___ favorable/unfavorable Fixed factory overhead volume variance _ favorable/unfavorable Total factory overhead cost variance $_________ favorable/unfavorable

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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

Route 66 Tire Co. manufactures automobile tires. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 6,000 tires were as follows:

	Standard Costs	Actual Costs
Direct materials	7,800 lbs. at $5.40	7,700 lbs. at $5.30
Direct Labor	1,500 hrs. at $17.90	1,530 hrs. at $18.20
Factory Overhead	Rates per direct labour hr., based on 100% of normal capacity of 1,560 direct labor hrs.
	Variable Cost, $3.50	$5,200 Variable Cost
	Fixed Cost, $5.50	$8,560 Fixed Cost

Each tire requires 0.25 hours of direct labor.

Required:

a. Determine the price variance, quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount.

Price variance	$___________	favorable/unfavorable
Quantity variance	___________	favorable/unfavorable
Total direct materials cost variance	$___________	favorable/unfavorable

b. Determine the rate variance, time variance, and total direct labor cost variance. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount.

Rate variance	$___________	favorable/unfavorable
Time variance	___________	favorable/unfavorable
Total direct labor cost variance	$___________	favorable/unfavorable

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 amount, and an unfavorable variance as a positive amount.

Variable factory overhead controllable variance	$_______________	favorable/unfavorable
Fixed factory overhead volume variance	_______________	favorable/unfavorable
Total factory overhead cost variance	$_______________	favorable/unfavorable

Direct Materials and Direct Labor, Variance Analysis; Factory Overhead Cost Variance Analysis
Route 66 Tire Co. manufactures automobile tires. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 6,000 tires were as follows:
Standard Costs
Actual Costs
Direct materials
7,800 Ibs. at $5.40
7,700 Ibs. at $5.30
Direct labor
1,500 hrs. at $17.90
1,530 hrs. at $18.20
Factory overhead
Rates per direct labor hr.,
based on 100% of normal
capacity of 1,560 direct
labor hrs.
Variable cost, $3.50
$5,200 variable cost
Fixed cost, $5.50
$8,560 fixed cost
Each tire regquires 0.25 hours of direct labor.
Required:
a. Determine the price variance, quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount.
Price variance
770 X
Favorable v
Quantity variance
540 X
Favorable v
Total direct materials cost variance
1,310 X
Favorable
b. Determine the rate variance, time variance, and total direct labor cost variance. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount.
Rate variance
459
Unfavorable v
Time variance
537
Unfavorable v
Total direct labor cost variance
996
Unfavorable v
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 amount, and an unfavorable
variance as a positive amount.
Variable factory overhead controllable variance
50
Favorable v
Fixed factory overhead volume variance
310
Unfavorable v
Total factory overhead cost variance
360| х
Unfavorable v

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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