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 70,000 units of product were as follows: Actual Costs Standard Costs 196,000 lbs. at $5.70 17,500 hrs. at $16.60 Rates per direct labor hr., based on 100% of normal capacity of 18,260 direct labor hrs.: Variable cost, $3.10 Fixed cost, $4.90 Each unit requires 0.25 hour of direct labor. Required: Direct materials Direct labor Factory overhead 194,000 lbs. at $5.60 17,900 hrs. at $16.90 $53,710 variable cost $89,474 fixed cost 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 Material Price Variance ✓ $ Favorable $ Favorable 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 Unfavorable Direct Labor Time Variance Unfavorable Total Direct Labor Cost Variance 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 number using a minus sign and an unfavorable variance as a positive number. Variable factory overhead controllable variance Favorable Fixed factory overhead volume variance Total factory overhead cost variance Favorable Unfavorable ✓ Unfavorable V ✓ ✓ ✓ V
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 70,000 units of product were as follows: Actual Costs Standard Costs 196,000 lbs. at $5.70 17,500 hrs. at $16.60 Rates per direct labor hr., based on 100% of normal capacity of 18,260 direct labor hrs.: Variable cost, $3.10 Fixed cost, $4.90 Each unit requires 0.25 hour of direct labor. Required: Direct materials Direct labor Factory overhead 194,000 lbs. at $5.60 17,900 hrs. at $16.90 $53,710 variable cost $89,474 fixed cost 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 Material Price Variance ✓ $ Favorable $ Favorable 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 Unfavorable Direct Labor Time Variance Unfavorable Total Direct Labor Cost Variance 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 number using a minus sign and an unfavorable variance as a positive number. Variable factory overhead controllable variance Favorable Fixed factory overhead volume variance Total factory overhead cost variance Favorable Unfavorable ✓ Unfavorable V ✓ ✓ ✓ V
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text: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 70,000 units of product were as follows:
Standard Costs
Actual Costs
194,000 lbs. at $5.60
17,900 hrs. at $16.90
196,000 lbs. at $5.70
17,500 hrs. at $16.60
Rates per direct labor hr.,
based on 100% of normal
capacity of 18,260 direct
labor hrs.:
Variable cost, $3.10
Fixed cost, $4.90
Each unit requires 0.25 hour of direct labor.
Required:
Direct materials
Direct labor
Factory overhead
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 Material Price Variance
Direct Materials Quantity Variance
Total Direct Materials Cost Variance
$53,710 variable cost
$89,474 fixed cost
$
$
$
Direct Labor Rate Variance
Favorable
Favorable
Favorable
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.
Unfavorable
✓
Unfavorable
- ✓
Unfavorable
- ✓
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
Favorable
Unfavorable
Unfavorable
✓
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