Question
Before preparing Part A, answer in complete sentences these 2 questions: 1. Looking at the direct materials equations for Standard Costs and Actual Costs, is
Before preparing Part A, answer in complete sentences these 2 questions:
1. Looking at the direct materials equations for Standard Costs and Actual Costs, is the materials
price variance favorable or unfavorable? Why?
2. Looking at the direct materials equations for Standard Costs and Actual Costs, is the materials
Problem A
Direct materials, direct labor, and factory overhead cost variance analysis
Obj. 3, 4Mackinaw 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:
Standard Costs | Actual Costs | |
Direct materials | 120,000 lbs. at $3.20 per lb. | 118,500 lbs. at $3.25 per lb. |
Direct labor | 12,000 hrs. at $24.40 per hr. | 11,700 hrs. at $25.00 per hr. |
Factory overhead | Rates per direct labor hr., based on 100% of normal capacity of 15,000 direct labor hrs.: | |
Variable cost, $8.00 | $91,200 variable cost | |
Fixed cost, $10.00 | $150,000 fixed cost |
Each unit requires 0.3 hour of direct labor.
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, fixed factory overhead volume variance, and total factory overhead cost variance.
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