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 78,000 units of product were as follows:

Line Item Description	Standard Costs	Actual Costs
Direct materials	195,000 lbs. at $5.50 per lb.	193,100 lbs. at $5.40 per lb.
Direct labor	19,500 hrs. at $16.80 per hr.	19,950 hrs. at $17.10 per hr.
Factory overhead	Rates per direct labor hr., based on 100% of normal capacity of 20,350 direct labor hrs.:
Factory overhead	Variable cost, $2.90	$55,980 variable cost
Factory overhead	Fixed cost, $4.60	$93,610 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		FavorableUnfavorable
Direct Materials Quantity Variance		FavorableUnfavorable
Total Direct Materials Cost Variance		FavorableUnfavorable

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		FavorableUnfavorable
Direct Labor Time Variance		FavorableUnfavorable
Total Direct Labor Cost Variance		FavorableUnfavorable

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		FavorableUnfavorable
Fixed factory overhead volume variance		FavorableUnfavorable
Total factory overhead cost variance