Direct Materials, Direct Labor, and Factory Overhead Cost Variance 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 7,200 units of product were as follows:

	Standard Costs		Actual Costs
Direct materials	9,400 lb. at $4.60		9,300 lb. at $4.50
Direct labor	1,800 hrs. at $17.30		1,840 hrs. at $17.50
Factory overhead	Rates per direct labor hr.,
	based on 100% of normal
	capacity of 1,880 direct
	labor hrs.:
		Variable cost, $4.80	$8,550 variable cost
		Fixed cost, $7.60	$14,288 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.

Direct materials price variance

$_________________

favorable OR unfavorable

Direct materials quantity variance	$_________________	favorable OR unfavorable

Total direct materials cost variance	$_________________	favorable OR unfavorable

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.

Direct labor rate variance

$_________________

favorable OR unfavorable

Direct labor time variance	$_________________	favorable OR unfavorable

Total direct labor cost variance	$_________________	favorable OR unfavorable

c. Determine variable factory overhead controllable variance, the 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.

Variable factory overhead controllable variance

$_________________

favorable OR unfavorable

Fixed factory overhead volume variance	$_________________	favorable OR unfavorable

Total factory overhead cost variance	$_________________	favorable OR unfavorable