Required 1 Compute the direct materials cost variance includ

Required 1. Compute the direct materials cost variance, including its price and quantity variances Actual Cost Standard Cost

Solution

Budgeted cost

Actual Cost

Rate

Total

Rate

Total

Direct Material

1200000

3

3600000

1195000

3.1

3704500

Direct Labour

240000

6

1440000

235000

5.75

1351250

Variable Factory Overhead

240000

4.62

1110000

235000

8.30

1950943

Fixed Factory Overhead

1050000

2083962

1. Direct Material Cost Variance

4. Direct Labor Variance

= Actual Cost - Budgeted Cost

= Actual Cost - Budgeted Cost

=3704500 - 3600000

= 1351250 - 1440000

104500

Unfavourable

88750

Favourable

2. Direct Material Price Variance

5. Direct Labor Rate Variance

=Actual Quantity(Std Price - Actual Price)

= Actual Hours (Std Rate - Actual Rate)

=1195000 lbs (3-3.1)

= 235000 hrs (6-5.75)

119500

Unfavourable

58750

Favourable

3. Direct Material Quantity Variance

6. Direct Labor Efficiency Variance

=Std Price (Budgeted Quantity - Actual Quantity )

= Std Rate (Budgeted Hours - Actual Hours)

=3 ( 1200000 - 1195000)

= 6(240000-235000)

15000

Favourable

30000

Favourable

7. Factory Overhead Variance

=Budgeted Overhead - Actual Overhead

=2160000-4034905

1874905

Unfavourable

	Budgeted cost			Actual Cost
		Rate	Total			Rate	Total
Direct Material	1200000	3	3600000		1195000	3.1	3704500
Direct Labour	240000	6	1440000		235000	5.75	1351250
Variable Factory Overhead	240000	4.62	1110000		235000	8.30	1950943
Fixed Factory Overhead	1050000				2083962
1. Direct Material Cost Variance		4. Direct Labor Variance
= Actual Cost - Budgeted Cost		= Actual Cost - Budgeted Cost
=3704500 - 3600000			= 1351250 - 1440000
104500	Unfavourable		88750	Favourable
2. Direct Material Price Variance		5. Direct Labor Rate Variance
=Actual Quantity(Std Price - Actual Price)	= Actual Hours (Std Rate - Actual Rate)
=1195000 lbs (3-3.1)			= 235000 hrs (6-5.75)
119500	Unfavourable		58750	Favourable
3. Direct Material Quantity Variance	6. Direct Labor Efficiency Variance
=Std Price (Budgeted Quantity - Actual Quantity )	= Std Rate (Budgeted Hours - Actual Hours)
=3 ( 1200000 - 1195000)		= 6(240000-235000)
15000	Favourable			30000	Favourable
7. Factory Overhead Variance
=Budgeted Overhead - Actual Overhead
=2160000-4034905
1874905	Unfavourable