Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Santiago 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 74,000 units of product were as follows: Standard Costs Direct materials Direct labor Factory overhead 214,600 lbs. at $5.00 per lb. 18,500 hrs. at $18.70 per hr. Rates per direct labor hr., based on 100% of normal capacity of 19,310 direct labor hrs. Actual Costs 212,500 lbs. at $4.80 per lb. 18,930 hrs. at $18.90 per hr. Variable factory overhead controllable variance Fixed factory overhead volume variance head coet variance Variable cost, $4.10 Fixed cost, $6.50 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 Favorable Favorable Favorable ✓ ✓ 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 Unfavorable Unfavorable Unfavorable V Total Direct Labor Cost Variance c. Determine the variable factory overhead controllable variance, 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. $75,090 variable cost $125,515 fixed cost Favorable Unfavorable Unfavorable ✓ ✓ *
Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Santiago 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 74,000 units of product were as follows: Standard Costs Direct materials Direct labor Factory overhead 214,600 lbs. at $5.00 per lb. 18,500 hrs. at $18.70 per hr. Rates per direct labor hr., based on 100% of normal capacity of 19,310 direct labor hrs. Actual Costs 212,500 lbs. at $4.80 per lb. 18,930 hrs. at $18.90 per hr. Variable factory overhead controllable variance Fixed factory overhead volume variance head coet variance Variable cost, $4.10 Fixed cost, $6.50 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 Favorable Favorable Favorable ✓ ✓ 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 Unfavorable Unfavorable Unfavorable V Total Direct Labor Cost Variance c. Determine the variable factory overhead controllable variance, 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. $75,090 variable cost $125,515 fixed cost Favorable Unfavorable Unfavorable ✓ ✓ *
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 Factory Overhead Cost Variance Analysis
Santiago 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 74,000 units of product were as follows:
Standard Costs
Direct materials
Direct labor
214,600 lbs. at $5.00 per lb.
18,500 hrs. at $18.70 per hr.
Rates per direct labor hr., based on 100% of normal
capacity of 19,310 direct labor hrs.
Variable cost, $4.10
Fixed cost, $6.50
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
Favorable
Direct Materials Quantity Variance
Favorable
Total Direct Materials Cost Variance
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.
✔
Direct Labor Rate Variance
Unfavorable
Direct Labor Time Variance
Unfavorable
Unfavorable
Factory overhead
Actual Costs
212,500 lbs. at $4.80 per lb.
18,930 hrs. at $18.90 per hr.
Fixed factory overhead volume variance
Total factory overhead cost variance
$75,090 variable cost
$125,515 fixed cost
✓
Total Direct Labor Cost Variance
c. Determine the variable factory overhead controllable variance, 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
Unfavorable
Unfavorable
✓
✓
✓
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