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: Direct materials Direct labor Factory overhead Standard Costs 222,000 lbs. at $5.90 per lb. 18,500 hrs. at $16.80 per hr. Rates per direct labor hr, based on 100% of normal capacity of 19,310 direct labor hrs.: Variable cost, $4.50 Actual Costs 219,800 lbs. at $5.80 per lb. 18,930 hrs. at $17.20 per hr. Variable factory overhead controllable variance Fixed factory overhead volume variance Total factory overhead cost variance $82,420 variable cost $137,101 fixed cost Fixed cost, $7.10 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 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 CHE 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,
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: Direct materials Direct labor Factory overhead Standard Costs 222,000 lbs. at $5.90 per lb. 18,500 hrs. at $16.80 per hr. Rates per direct labor hr, based on 100% of normal capacity of 19,310 direct labor hrs.: Variable cost, $4.50 Actual Costs 219,800 lbs. at $5.80 per lb. 18,930 hrs. at $17.20 per hr. Variable factory overhead controllable variance Fixed factory overhead volume variance Total factory overhead cost variance $82,420 variable cost $137,101 fixed cost Fixed cost, $7.10 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 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 CHE 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,
Chapter1: Financial Statements And Business Decisions
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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
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:
Direct materials
Direct labor
Factory overhead
Standard Costs
222,000 lbs at $5.90 per lb.
18,500 hrs. at $16.80 per hr.
Rates per direct labor hr., based on 100% of normal
capacity of 19,310 direct labor hrs.:
Variable cost, $4.50
Actual Costs
219,800 lbs. at $5.80 per lb.
18,930 hrs. at $17.20 per hr.
$82,420 variable cost
$137,101 fixed cost
Fixed cost, $7.10
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
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
Variable factory overhead controllable variance
Fixed factory overhead volume variance
Total factory overhead cost variance
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.
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