OBJ. 3, 4 PR 23-3A Direct materials, direct labor, and factory overhead cost variance 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 40,000 units of product were as follows: Direct Materials Direct Labor Factory Overhead Standard Costs 120,000 lbs. @ $3.20 12,000 hrs. @ $24.40 Actual Costs 118,500 lbs. @ $3.25 11,700 hrs. @ $25.00 Rates per direct labor hour, based on 100% of normal capacity of 15,000 direct labor hours. Variable cost, $8.00 Fixed cost, $10.00 $91,200 variable cost $150,000 fixed cost Each unit requires 0.3 hour of direct labor. Warren, C. S., Jonick, C. A., & Schneider, J. S., (2021). Accounting (28 ed.). Boston, MA: Cengage.
OBJ. 3, 4 PR 23-3A Direct materials, direct labor, and factory overhead cost variance 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 40,000 units of product were as follows: Direct Materials Direct Labor Factory Overhead Standard Costs 120,000 lbs. @ $3.20 12,000 hrs. @ $24.40 Actual Costs 118,500 lbs. @ $3.25 11,700 hrs. @ $25.00 Rates per direct labor hour, based on 100% of normal capacity of 15,000 direct labor hours. Variable cost, $8.00 Fixed cost, $10.00 $91,200 variable cost $150,000 fixed cost Each unit requires 0.3 hour of direct labor. Warren, C. S., Jonick, C. A., & Schneider, J. S., (2021). Accounting (28 ed.). Boston, MA: Cengage.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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:OBJ. 3,4
PR 23-3A Direct materials, direct labor, and factory overhead cost variance
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 40,000 units of
product were as follows:
Direct Materials
Direct Labor
Factory Overhead
Standard Costs
120,000 lbs. @ $3.20
12,000 hrs. @ $24.40
Actual Costs
118,500 lbs. @ $3.25
11,700 hrs. @ $25.00
Rates per direct labor hour, based on 100% of normal capacity of 15,000
direct labor hours.
Variable cost, $8.00
Fixed cost, $10.00
$91,200 variable cost
$150,000 fixed cost
Each unit requires 0.3 hour of direct labor.
Warren, C. S., Jonick, C. A., & Schneider, J. S., (2021). Accounting (28 ed.). Boston, MA: Cengage.
Instructions
Determine (a) the direct materials price variance, direct materials quantity variance, and total
direct materials cost variance; (b) the direct labor rate variance, direct labor time variance, and
total direct labor cost variance; and. (c) the variable factory overhead controllable variance, the
fixed factory overhead volume variance, and the total factory overhead cost variance.
Transcribed Image Text:1 Problem 23-3A Problem 23-3A
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a.
b.
Direct Materials Price Variance
Direct Materials Quantity Variance
Total Direct Materials Cost Variance
Direct Labor Rate Variance
Direct Labor (Time) Efficiency Variance
Total Direct Labor Cost Variance
$5,925
$1,125 Unfavorable
Favorable
Wrong
Wrong
Correct
Wrong
Wrong
Wrong
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