Question Content Area 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 70,000 units of product were as follows: Line Item Description Standard Costs Actual Costs Direct materials 231,000 lbs. at $5.50 per lb. 228,700 lbs. at $5.30 per lb. Direct labor 17,500 hrs. at $16.20 per hr. 17,900 hrs. at $16.40 per hr. Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 18,260 direct labor hrs.: Factory overhead Variable cost, $4.30 $74,500 variable cost Factory overhead Fixed cost, $6.80 $124,168 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. Line Item Description Amount Variance Direct Materials Price Variance $fill in the blank 1 Direct Materials Quantity Variance $fill in the blank 3 Total Direct Materials Cost Variance $fill in the blank 5 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. Line Item Description Amount Variance Direct Labor Rate Variance $fill in the blank 7 Direct Labor Time Variance $fill in the blank 9 Total Direct Labor Cost Variance $fill in the blank 11 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. Line Item Description Amount Variance Variable factory overhead controllable variance $fill in the blank 13 Fixed factory overhead volume variance $fill in the blank 15 Total factory overhead cost variance $fill in the blank 17

Question Content Area 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 70,000 units of product were as follows: Line Item Description Standard Costs Actual Costs Direct materials 231,000 lbs. at $5.50 per lb. 228,700 lbs. at $5.30 per lb. Direct labor 17,500 hrs. at $16.20 per hr. 17,900 hrs. at $16.40 per hr. Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 18,260 direct labor hrs.: Factory overhead Variable cost, $4.30 $74,500 variable cost Factory overhead Fixed cost, $6.80 $124,168 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. Line Item Description Amount Variance Direct Materials Price Variance $fill in the blank 1 Direct Materials Quantity Variance $fill in the blank 3 Total Direct Materials Cost Variance $fill in the blank 5 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. Line Item Description Amount Variance Direct Labor Rate Variance $fill in the blank 7 Direct Labor Time Variance $fill in the blank 9 Total Direct Labor Cost Variance $fill in the blank 11 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. Line Item Description Amount Variance Variable factory overhead controllable variance $fill in the blank 13 Fixed factory overhead volume variance $fill in the blank 15 Total factory overhead cost variance $fill in the blank 17

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter9: Evaluating Variances From Standard Costs

Section: Chapter Questions

Problem 3PA: Direct materials, direct labor, and factory overhead cost variance analysis Mackinaw Inc. processes...

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Question Content Area

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 70,000 units of product were as follows:

Line Item Description	Standard Costs	Actual Costs
Direct materials	231,000 lbs. at $5.50 per lb.	228,700 lbs. at $5.30 per lb.
Direct labor	17,500 hrs. at $16.20 per hr.	17,900 hrs. at $16.40 per hr.
Factory overhead	Rates per direct labor hr., based on 100% of normal capacity of 18,260 direct labor hrs.:
Factory overhead	Variable cost, $4.30	$74,500 variable cost
Factory overhead	Fixed cost, $6.80	$124,168 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.

Line Item Description	Amount	Variance
Direct Materials Price Variance	$fill in the blank 1
Direct Materials Quantity Variance	$fill in the blank 3
Total Direct Materials Cost Variance	$fill in the blank 5

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.

Line Item Description	Amount	Variance
Direct Labor Rate Variance	$fill in the blank 7
Direct Labor Time Variance	$fill in the blank 9
Total Direct Labor Cost Variance	$fill in the blank 11

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.

Line Item Description	Amount	Variance
Variable factory overhead controllable variance	$fill in the blank 13
Fixed factory overhead volume variance	$fill in the blank 15
Total factory overhead cost variance	$fill in the blank 17

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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