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 Direct materials 189,000 lbs. at $5.00 187,100 lbs. at $4.80 Direct labor 17,500 hrs. at $16.90 17,900 hrs. at $17.10 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 18,260 direct labor hrs.: Variable cost, $2.90 $50,240 variable cost Fixed cost, $4.60 $83,996 fixed cost 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 Total Direct Labor Cost Variance $________ Unfavorable 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 Fixed factory overhead volume variance $___________ Unfavorable Total factory overhead cost variance $__________ Unfavorable

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 Direct materials 189,000 lbs. at $5.00 187,100 lbs. at $4.80 Direct labor 17,500 hrs. at $16.90 17,900 hrs. at $17.10 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 18,260 direct labor hrs.: Variable cost, $2.90 $50,240 variable cost Fixed cost, $4.60 $83,996 fixed cost 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 Total Direct Labor Cost Variance $ Unfavorable 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 Fixed factory overhead volume variance $_ Unfavorable Total factory overhead cost variance $____ Unfavorable

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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
Direct materials	189,000 lbs. at $5.00	187,100 lbs. at $4.80
Direct labor	17,500 hrs. at $16.90	17,900 hrs. at $17.10
Factory overhead	Rates per direct labor hr.,
	based on 100% of normal
	capacity of 18,260 direct
	labor hrs.:
		Variable cost, $2.90	$50,240 variable cost
		Fixed cost, $4.60	$83,996 fixed cost

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
Total Direct Labor Cost Variance	$________	Unfavorable

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
Fixed factory overhead volume variance	$___________	Unfavorable
Total factory overhead cost variance	$__________	Unfavorable

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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