Direct Materials Direct Labor and Factory Overhead Cost Varl

Direct Materials, Direct Labor, and Factory Overhead Cost Varlance 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 6,000 units of product were as follows Standard Costs Actual Costs materials 7,800 b. at $5.60 1,500 hrs. at $18.30 Rates per direct labor hr., based on 100% of normal capacity of 1,560 direct labor hrs.: 7,700 lb. at $5.50 Direct labor 1,530 hrs, at $18.60 Factory overhead Varlable cost, $3.30 Flxed cost, $5.20 4,900 varlable cost $8,112 fxed cost Each unit requires 0.25 hour of direct labor Required: a. Determine the direct matertals price variance, direct materals quantity vartance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable vartance as a positive number Price varlance Quantity varlance Total direct materlals cost varlance b. Determine the direct labor rate varlance, direct labor time variance, and total direct labor cost varlance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive numben Rate variance Time variance Total direct labor cost varlance c. Determine varlable factory overhead controllable varlance, the fixed factory overhead volume varlance, and total factory overhead cost varlance. Enter a favorable varlance as a negative number using a minus sign and an unfavorable varance as a positive number. Varlable factory overhead controllable varlance Flxed factory overhead volume varlance Total factory overhead cost variance

Solution

Calculation of direct material variance

A) Direct material price variance =(standard rate - Actual rate) *actual quantity =(5.6-5.5)7700=770 favourable

B) Direct material quantity variance=(standard qty-actual qty) standard rate=(7800-7700)*5.60=560favourable.

C) Total direct material cost variance =A+B

=770+560=1330.favourable

Calculation of labor variance

A) Labor rate variance=(SR-AR) *actual hour

=(18. 30-18.60)*1530=-459adverse

B) Time variance =(standard time - Actual time) *standard rate

=(1500-1530)*18.30=-549adverse

C) Total Labour cost =A+B=-549+(-459)=-1008adverse

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