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Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Traction Treads Tire Co. manufactures automobile tires. Standard costs and actual costs for direct materials,
Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Traction Treads Tire Co. manufactures automobile tires. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 10,400 tires were as follows: Standard Costs Actual Costs 252,500 lb. at $7.30 Direct materials 250,000 lb. at $7.25 Direct labor 5,000 hrs. at $16.70 5,200 hrs. at $17.00 Rates per direct labor hr., Factory overhead based on 100% of normal capacity of 5,000 direct labor hrs.: Variable cost, $8.00 Fixed cost, $15.00 , $ Each tire requires 0.5 hour of direct labor. $40,000 variable cost $75,000 fixed cost 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 12,625 Unfavorable Direct materials quantity variance 18,125 Unfavorable Total direct materials cost variance $ 30,750 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 1,500 X Favorable Direct labor time variance 3,400 X Favorable Total direct labor cost variance 4,900 X Favorable 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. Variable factory overhead controllable variance 1,600 X Favorable Fixed factory overhead volume variance 3,000 X Favorable Total factory overhead cost variance 1,900 X Favorable Feedback Check My Work Unfavorable variances can be thought of as increasing costs (a debit). Favorable variances can be thought of as decreasing costs (a credit). The variable factory overhead controllable variance is the difference between the actual variable overhead costs and the budgeted variable overhead for actual production, The fixed factory overhead volume variance is the difference between the budgeted fixed overhead at 100% of normal capacity and the standard fixed overhead for the actual units produced
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