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 Ib. at $5.20 9,300 Ib. at $5.00 Direct labor 1,800 hrs. at $16.10 1,840 hrs. at $16.30 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,880 direct labor hrs.: Variable cost, $4.30 $7,660 variable cost Fixed cost, $6.80 $12,784 fixed cost Each unit requires 0.25 hour of direct labor.
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 Ib. at $5.20 9,300 Ib. at $5.00 Direct labor 1,800 hrs. at $16.10 1,840 hrs. at $16.30 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,880 direct labor hrs.: Variable cost, $4.30 $7,660 variable cost Fixed cost, $6.80 $12,784 fixed cost Each unit requires 0.25 hour of direct labor.
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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Direct Materials, Direct Labor, and
Transcribed Image Text: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
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
7,200 units of product were as follows:
Standard Costs
Actual Costs
Direct materials
9,400 lb. at $5.20
9,300 Ib. at $5.00
Direct labor
1,800 hrs. at $16.10
1,840 hrs. at $16.30
Factory overhead
Rates per direct labor hr.,
based on 100% of normal
capacity of 1,880 direct
labor hrs.:
Variable cost, $4.30
$7,660 variable cost
Fixed cost, $6.80
$12,784 fixed cost
Each unit requires 0.25 hour of direct labor.
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