Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Traction Treads Tire Co. manufactures automobile tires. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 10,400 tres were as follows: Actual Costs Direct materials Direct labor Factory overhead Standard Costs 250,000 lb. at $7.25 5,200 hrs. at $17.00 252,500 lb. at $7,30 5,000 hrs. at $16.70 Rates per direct labor h based on 100% of normal capacity of 5,000 direct labor hrs.: Variable cost, $6.00 $40,000 variable cost Fixed cost, $15.00 $75,000 fixed cost Each tire requires 0.5 hour of direct labor Required: a. Determine the direct materials price variance, direct materials quantity veriance, 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 X Unfavorable. -✔ Direct materials quantity variance X Unfavorable -V Total direct materials cost variance X Unfavorable -V 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 X Favorable X Faverable X Favorable. Total direct labor cost variance ✓ c. Determine the variable factory everhead 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. X Faverable -V Variable factory overhead controllable variance Fixed factory overhead volume variance X Favorable.. X Favorable Total factory overhead cest variance
Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Traction Treads Tire Co. manufactures automobile tires. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 10,400 tres were as follows: Actual Costs Direct materials Direct labor Factory overhead Standard Costs 250,000 lb. at $7.25 5,200 hrs. at $17.00 252,500 lb. at $7,30 5,000 hrs. at $16.70 Rates per direct labor h based on 100% of normal capacity of 5,000 direct labor hrs.: Variable cost, $6.00 $40,000 variable cost Fixed cost, $15.00 $75,000 fixed cost Each tire requires 0.5 hour of direct labor Required: a. Determine the direct materials price variance, direct materials quantity veriance, 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 X Unfavorable. -✔ Direct materials quantity variance X Unfavorable -V Total direct materials cost variance X Unfavorable -V 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 X Favorable X Faverable X Favorable. Total direct labor cost variance ✓ c. Determine the variable factory everhead 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. X Faverable -V Variable factory overhead controllable variance Fixed factory overhead volume variance X Favorable.. X Favorable Total factory overhead cest variance
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
Traction Treads Tire Co. manufactures automobile tires. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 10,400 tires were
as follows:
Standard Costs
Actual Costs
Direct materials
250,000 lb. at $7.25
5,200 hrs. at $17.00
252,500 lb. at $7.30
5,000 hrs. at $16.70
Direct labor
Factory overhead
Rates per direct labor h
based on 100% of normal
capacity of 5,000 direct
labor hrs.
Variable cost, $6.00
$40,000 variable cost
$75,000 fixed cost
Fixed cost, $15.00
Each tire requires 0.5 hour of direct labor
Required:
a. Determine the direct materials price variance, direct materials quantity veriance, 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
X Unfavorable. - V
Direct materials quantity variance
X Unfavorable
- V
Total direct materials cost variance
X Unfavorable -V
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
X Favorable
-V
Direct labor time variance
X Favorable
- V
Total direct labor cost variance
X Favorable. -V
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
X Faverable -V
X Favorable -✓
Fixed factory overhead volume variance
X Favorable
✓
Total factory overhead cost variance
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